India Government Revising Custom Duty In Telecom Industry

Shakti - Nov 30, 2018


India Government Revising Custom Duty In Telecom Industry

India government has recently adopted a new tax policy in the telecom industry. This article will discuss the review process after the implement.

A month ago, India imposed a higher customs duty on telecom gear, the country’s economy has processed a review on this decision, especially in the view of domestic service suppliers. In addition, EconomicTimes was fortunate to approach the news from three government administrators that US authorities were looking for a reversal.

There has been a discussion between the telecom department, revenue, and commerce department and Ministry of Electronics and Information Technology about the problems relating to newly adopted duties. The senior government administrator added that the possible issue has been predicted by the telecom industry.

PhotoIndia Government Revising Custom Duty In Telecom Industry

As stated by an administrator “It is being examined... Some issues have come up, so the duty structure needs to be re-examined”

Increasing import customs duty was also applied by the representatives of the US government, said by another administrator. The representatives of US explained that raising tariffs could discourage supply chain, negatively affect to consumer prices, cause hesitation of trading and properly go against the international trade agreements of India, informed to EconomicTimes by a person involved with this matter.

In October, basic customs duty was raised by India government on some telecom gadgets. Import tax on printed circuit board used in that equipment was also increased. This action is expected to prevent unnecessary imports, solve the budget deficit and especially give advantages to “Make in India” innovations.

It is said that both the current macroeconomic situation and currency condition should be taken into account. The third official claimed that given the appreciated rupee and speedy declining price of crude, the current macroeconomic situation is suitable for the government to process the review.

There are two main concerns: the current account deficit and the burden the telecom industry might face when lowering customs duties leading to higher imports. A main purpose of the review is to decide and take actions towards reactions of economic: restore the previous level of customs duty or reduce customs duty at a certain point to solve the mentioned concerns.

As for General Director Rajan Mathew of India Cellular Operators Association, even when the telecom industry gives a support to the action of the government in boosting “Make in India”, doubling import customs duty would not immediately make a huge difference in domestic manufacturing.  He said that it would put pressure not only on import bills of telecom industry but also on the current financial responsibilities.

Mathews raised the awareness of pressure that higher import tax rate put on the industry and suggested that telecom companies should raise funds and make the investment in networks to provide better service. He also provided industry estimation of $8 billion telecom import every year.

Given the research estimation, increasing customer duty would leave a burden of Rs 6,000 crore each year on the shoulder of the telecom industry.

India government increased the basic customs duty on telecom goods by 10% (from 10% to 20%). It applies to the optical transport network, optical transport equipment, base stations, IP radios and a combination of one or more of Packet Optical Transport Switch or Product  (POTS or POTP). A primary supplier of telecom goods got used to free duty and it is now facing the rate of 10%.

The raised customs duty is said to be a result of India’s current account deficit which was 0.8% of GPD in the Fiscal year 2017 and reached 1.9% in the Fiscal year 2018. Depreciation of rupee in comparison with dollar would be another cause of this movement.

In last July, India decided to tax smartphones and planned to gradually increase it in the budget. In order to encourage domestic manufacturing, automobile parts, LED/LCD television, digital entertainment devices and smartwatches are also included in the plan of increasing customs duty.

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