Budget 2022: Tech companies hope for GST reconsiderations for electronics

Budget 2022: Tech companies hope for GST reconsiderations for electronics

One of the main concerns of the tech companies is the 28 per cent GST slab which currently covers all electronic items.

The tech industry is hoping for a reduced GST on electronics The tech industry is hoping for a reduced GST on electronics

With the government getting ready to announce the Budget for 2022, the one main concern that most tech companies have raised is the 28 per cent GST slab that is enforced for electronics across the sector. Most companies are of the opinion that if the government continues to charge 28 per cent GST then it is not going to work out well for the companies or the customers since India is a price-sensitive market.

“The government should seriously reconsider the GST slab for electronics, currently a lot of items come under 28 per cent slab. As Rajeev Chandrasekhar said, India will be hub of electronics manufacturing in next 2-5 years, it is only possible if the market grows. India is a price sensitive market, if the government charges 28 per cent GST we will never be price competitive. All large appliances and TVs should be under 18 per cent tax slab. The government in past has already given assurance if GST collection will be above 1lakh cr for one quarter they will consider it,” said Avneet Singh Marwah, CEO, SPPL, Exclusive brand licensee of Thomson in India.

He added that the government should consider a lower interest rate on consumer electronics as it will encourage consumers to buy higher ASP products and help India progress further towards its digital plans.

“We are in the middle of going into another wave, and the industry is realising the importance of Atmanirbhar Bharat. The government at this point should take more proactive measures to neutralise imports from our neighboring country. 65 per cent of raw materials for electronics come from our adjacent country, which keeps fluctuating prices that destabilise the markets in India. On the other hand, the government has taken some path breaking decisions, to create this ecosystem by approving Rs 76,000 crore under PLA scheme for the development of semiconductor chipset and display panels. We request the government to announce the timeline so that related industries can take full benefit of it,” Marwah added.

According to Marwah, there is another sector that the government should focus on and that is the cargo sector since it is something that affects not just the tech industries, but many others too.

“We have seen 10 times growth in sea freight in the recent past, along with that timeline have increased 2x. There is a big syndicate in this sector which is causing this delay. Which is causing huge loss to the economy as these delays are being managed at Indian sea ports as well,” Marwah pointed out.

Marwah's concerns about the GST slab was echoed by Fijufilm India's Arun Babu who thinks that one of the best ways to boost consumer spending is through better tax reforms that favour the buyers.

“As a growing important segment, the consumer tech industry is looking forward to a government boost to consumer spending via friendly tax reforms which has otherwise been impacted by multiple covid waves. Despite the global chip shortage and increased raw material prices, the consumer appetite for electronics is still prevalent. However, increased product costs translate into consumers paying higher GST, which directly influences their purchasing power. These reforms will not only bolster consumer expenditure but will also aid in reviving the economy," said Babu, General Manager, EID, Optical Devices and Instax Division, Fujifilm India.

Babu added that the industry is hoping that the government announced more initiatives that increase spending on India's manufacturing capabilities in semiconductors to avoid another global chip shortage.

Gaming is another sector that is hoping for a boost with better investments in digital technology, particularly for start-ups.

 “We expect the Budget to further incentivise investments in digital technology, and particularly in the startup and scale-up ecosystem of India, which has been one of the brightest sectors of last year. This would give the already growing space a much-needed turbo charge,” said Rajan Navani, VC & MD, JetSynthesys and President of Indian Digital Gaming Society (IDGS).

 “We would further like to see the government come up with ways on how more domestic capital can be invested in new age sectors, therefore finding a way to normalise long-term capital gains tax for private equity of 20 per cent and match it to the long-term capital gain for public markets which is currently at 10 per cent. We would like to see more investments pumped into the digital infrastructure, as digital has been one of the strongest areas coming out of the pandemic and needs to be further strengthened,” Navani added.

One of the key sectors that can also help boost the gaming industry in the country is the display ecosystem and this sector too is hoping for the announcement of better programs and investments.

“We are hoping this budget, the government announces steps to revitalise and reorganise the economy which has been impacted by the pandemic. This can be a positive start to encourage sustainable growth and push Digital Infrastructure- 5G, edge computing, and secured data management in India. The comprehensive program for the 'development of sustainable semiconductor and display ecosystem in the country' will be a boost in making India a global hub of electronic system design and manufacturing but we would like to see reforms that will drive consumption and improve consumer demand," said Alok Dubey, Chief Finance Officer, Acer India.

Another concern voiced by many other tech players in the space is that the government needs to do more to support MSMEs both online and offline.

"In response to the economic hardship created by COVID-19, several liquidity measures to support the MSMEs were announced. However, while the headline schemes were attractive the fine print made it very difficult for the new age fintech NBFCs to take advantage of the schemes. Due to such constraints the expected benefits of these support schemes did not reach/transmit to the bottom of the pyramid MSMEs mostly catered to by fintechs/small NBFCs," said Alok Mittal, Co-Founder and CEO, Indifi Technologies.

"This Budget must be in pursuit of better implementation of the schemes already in place. Further, the fiscal budget should announce measures to incentivise and strengthen support from SIDBI-like institutions and PSB’s towards lending to smaller NBFCs to ensure credit to SMEs at lower cost of capital,” Mittal added.

"It is critical to incentivise offline SMEs to adopt and strengthen digital solutions to ensure better business prospects and speedy recovery of the overall economy. Moreover, digital infrastructure support will be important especially for MSME retailers since the future is getting more and more digitised, personalised, and connected. If we equip them from business disruption, it will contribute more to the Indian economy," Dilli Babu Nandarapu, Founder and CEO, ShopConnect said.

"In addition, accelerating ONDC rollout will facilitate e-commerce platform providers to offer more features and easier customer onboarding covering rural areas and non-metro cities as well. Lastly, promoting sales process outsourcing (SPO) as it will provide more employment opportunities at the same time global brands can leverage India's advantage," he pointed out.

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Published on: Jan 21, 2022, 3:10 PM IST
Posted by: Jhinuk Sen, Jan 21, 2022, 3:01 PM IST