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Published on : Jul 20, 2015

Policy-makers in India are rejoicing since they seem to have pulled the right string to spearhead their development propaganda. According to the latest published reports, the country has successfully restored a key tariff advantage in favor of local manufacturers that was encroached away after a Supreme Court ruling. The news gave a tremendous impetus to the Prime Minister Narendra Modi’s campaign – “Make in India”. The incentive is poised to give a momentum to the domestic manufacturers of mobile phones, laptops, tablets, and other electronic items. Coal producers are also likely to benefit from this incentive. The Central Board of Excise and Customs, which is the apex body in India for indirect taxes, has said that the producers manufacturing goods in India will enjoy a concessional 2% regime on duty irrespective of availing tax credit on inputs, however importers will have to continue paying 12.5% countervailing duty. 

The Supreme Court has recently passed a ruling in a case of chemical-based intermediate manufacturer, SRF Ltd, that the importers may avail a lower duty regime but only if they are not taking any tax credits. However, the new ruling according to market watchers has put to risk the nascent plans of Foxconn Technology Group, a Taiwan based smartphone manufacturing company and Softbank of Japan to establish manufacturing units in India and also placed the existing manufacturers like Huawei Technologies Co. and Samsung Electronics Co. at a disadvantageous position.

The mobile phone manufacturers who have plants dedicated to assembling devices in the country, however will benefit only little from the latest move by the government. An industry source revealed that in case of mobile phone manufacturers to avail the benefit, they will have to pay for inputs to avail the benefit of concessional rates on final products. Hence, assembly of parts alone might not be a lucrative proposition.