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Budget 2018: How government can help Indian mobile phone makers

Rajiv Jain     January 18, 2018

2017 was an eventful year with Prime Minister Narendra Modi government's implementation of the GST. Technology decision-makers are now looking ahead to the 2018 fiscal.

Here are the key expectations of the technology industry ahead of the Budget 2018 on February 1:

Reduce GST on mobile phone components: GST rates on some products used in manufacturing of mobile phones are on a higher side. Battery, shield cover attract 28%, while the GST on the mobile phone is 12%. They should be categorized in the same GST rate bucket of 12%. The higher GST rates for these subparts increases the cost of mobile phones. Reduction in rate would ease pressure on mobile phone manufacturers and also support the Prime Minister's Make in India campaign.

Reduce GST on power banks, web cams:
There should be reduction in GST rates for products like power banks, television tuner cards and web cams. Such products are used by majority of consumers in their daily lives. These goods are not luxury goods or sin goods, but they fall under the highest rate slab of 28%. The ultimate burden of which is borne by the consumer.

Increase refund limit:
An increase in refund limit under area-based exemption scheme is needed. Presently, the limit of claiming refund under the area-based exemption scheme is 29% of the IGST. This should be increased to 50% and 58%. Low refund amounts may result in loss for some units based in remote locations. Also, there is no time limit fixed for giving such tax incentive, which strains the working capital of a company.

Lack of input credit in factory construction:
Currently, there is a disallowance of credit of tax paid on inputs and input services used directly or indirectly in the construction of a building or a factory. Every manufacturer, in the course of his business, undertakes construction of either a building or a factory or both. Such input credit relating to construction should be allowed as a credit to manufacturers as it motivates them to open more branches, which eventually helps in creating more jobs.

State support: In India, budgetary support is given by the central government. State governments do very little to support manufacturing entities. In line with what is followed in neighboring countries like China, every state should be funded with a separate budget to support local manufacturers. Such a measure would help such local manufacturers and attract new businesses.

FTAs with consumption based economies:
The government has signed free trade agreements with production-based economies like Singapore, Thailand, which leads to increased imports and huge deficit in forex reserves. It also adversely impacts manufacturing units, whose cost of producing becomes more than cost of imported products. Instead, FTA agreements with consumption-based economies like United States may be more useful as it would increase our exports.

Rajiv Jain is the CFO of Intex Technologies.

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