NEW DELHI :The government is set to rationalize tariffs for inputs and sub-components used for making electronics goods, according to minister of electronics and information technology Rajeev Chandrasekhar.
The ministry of electronics and information technology has been in discussions with the revenue department under the ministry of finance to review the tariffs or import duties on the components that are needed for local production of finished goods that is being scaled up.
“We have in the last budget also made our point of view known to the department of revenue. They are very positive, very open. The finance minister herself is very seized of the matter. I think you will see that as the Indian economy is transitioning from the model of manufacturing for local demand to a manufacturing-for-global-demand model, that our tariffs will also reform,” Chandrasekhar said in an interaction with Mint last week.
“In the coming 10 to 12 months, you will see a lot of relook at tariff on components, making it easier, more viable and competitive for exports,” he noted.
Chandrasekhar however added that it was up to his ministry to convince the department of revenue that the exports growth story from India was here to stay and would increase from here on.
“It is also a question of at what point does the graph (of local production and exports) and the inflection point intersect, that gives comfort to the Department of Revenue, that exports are really a sustainable model. It is our duty to convince and persuade them that this is not some one-year phenomenon but a a permanent business model. Electronics will continue to grow double digit, and exports will continue to grow even faster,” he noted.
He added that the case for revising or relooking at the tariffs was legitimate and needed from a larger economic growth perspective where electronics manufacturing played a big role, with exports being a significant part of it.
India’s electronics industry has made representations to the government seeking rationalization of tariffs or import duties to reduce disadvantages and increase competitiveness with rivals like Vietnam, Mexico, Thailand and China.
In a recent report, a comparison covering 120 non-zero tariff lines, industry body Indian Cellular and Electronics Association said that India’s tariffs were higher for up to 98% lines compared to Vietnam (for FTA tariffs) and 90% of the lines compared to Thailand, adding that the competing economies have approximately double or more zero- tariff lines than India. India’s MFN tariff average is 9.7%, compared to averages from 3.2% in China, the report noted.
Over 80% of Vietnam’s imports for 120 tariff lines are under free trade agreements (FTAs). The average tariff in Vietnam (considering their FTA imports) is much lower – close to 1%. The study also shows that instead of building a domestic ecosystem, high import duties perpetuate imports as it results in uncompetitiveness of the domestic ecosystem.The industry has sought a reduction in the number of tiers/slabs from six – 0%, 2.5%, 5%, 10%, 15% and 20% – to three – 0%, 5% and 10%, since it would impact India’s goals to reach the $300 bn electronics production goal by 2025-26 – including $120 bn of exports. This will also considerably reduce arbitrage, misinterpretation and consequent disputes.
