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Published on : Jul 22, 2015

“Make in India” has received a shot in the arm with the government restoring a key tariff advantage to local manufacturers. The local manufacturers of electronic goods such as laptops, tablets, and mobile phones will be benefitted from this incentive as well as other manufacturers such as coal producers. According to the Central Board of Excise and Customs, these manufacturing items will be able to enjoy a concession of 2% duty regime without availing tax credits on inputs. However, importers will be required to pay 12.5% countervailing duty.

Earlier, the Supreme Court of India had ruled that the importers could enjoy lower duty regime in case they did not take tax credits. This had risked the plans of foreign investors such as Japan’s Softbank and FoxConn Technology of Taiwan to set up manufacturing plants in the country. The rule had also affected the existing plants of Huawei Technologies Co. and Samsung Electronics Co. 

However, the tariff advantage to local manufacturers will not really benefit those mobile phone manufacturers who assemble devices with imported inputs. Market analysts have pointed out that to enjoy the benefit of concessional rates on final products, the mobile phone manufacturers need to appropriate duty on imports. Hence, assembling of parts might not turn out to be a beneficial proposition for the mobile phone manufacturers. 

The Indian government has been encouraging the domestic manufacturers of electronic items owing to the presence of large domestic market run by imports. In FY15, India shipped telecom instruments, computer hardware, and consumer electronics items worth US$37 billion. 1% Excise duty and National Calamity and Contingency Duty of 1% are levied on mobile phones. On the other hand, countervailing duty of 12.5% is implemented on imported devices. However, the Supreme Court ruling put the local manufacturers at par with importers. The government has filed a petition against the decision to promote manufacturing in India by restoring the duty incentives.