Electronics firms seek lower tariffs from Budget 2023

The electronics industry has urged the government to reduce tariffs on parts and components, including printed circuit board assembly (PCBA), connectors, and mobile phone camera modules in the Union budget for FY24.

Industry bodies and stakeholders said some duty structures need revision since they have become a burden on the industry. They claimed that such duties are impacting the industry’s ability to meet production targets, essential for the government’s ‘Make in India’ initiative.

For instance, in its pre-budget recommendations, the India Cellular and Electronics Association (ICEA), an industry body which counts Foxconn and Apple among others, said existing tariffs of 2.75% on parts, mobile phones components and sub-assemblies should be removed as they are adding to the burden on manufacturers and endangering the domestic industry.

The ICEA also sought lower duties on parts of open cell panels for television manufacturing. Open cells are a critical component of LCD panels, used in manufacturing TVs. India currently charges a 5% basic customs duty on open cell components.

Arjun Bajaj, director of Greater Noida-based contract TV manufacturer Videotex International, said the electronics industry has seen ups and downs in the last two years, due to covid and geopolitical issues. He added that the budget is an opportunity for the government to provide the “necessary boost” to the industry. “The long-awaited key pain point for the smart TV industry that the government must take into account is the GST slab, which is 18% for up to 32 inches and 28% for above 32 inches models. Lowering these slabs will give customers more purchasing power, which leads to optimizing the market,” Bajaj said, adding that the TV industry is also hoping for production linked incentive (PLI) incentives being given to mobile phone and IT hardware makers.

The average price of TVs in India jumped 27% from the year earlier in the first quarter of 2022 amid higher demand for larger screens and premium features in TVs, Mint reported in June last year.

The ICEA also sought reduction in the duty on mechanics as more than 70% of components are still imported, partly due to the high duty of 8.25% on resins and other raw materials. Other demands include better synchronization between customs, income tax and GST authorities so that taxes on royalties paid to foreign firms by domestic electronics companies are taxed only once as per the contract between supplier and user.

Last year, Chinese OEM Xiaomi was slapped with penalties for allegedly evading taxes on royalty payments to their parent firms.

Meanwhile, the Manufacturers Association for Information Technology (MAIT) sought changes to the direct taxes levied on firms, including tax deduction at source (TDS). It sought an increase in the threshold of ₹20,000 prescribed in Section 194R of the Income Tax Act to ₹1,00,000.

Section 194R requires a tax payer to deduct 10% TDS on benefits or prerequisites worth ₹20,000 or more. “Considering the present economic scenario, the threshold limit should be increased to ₹1,00,000 to focus only on ‘big ticket’ items/recipients and thus easing compliance burden for tax deductor,” the body said in its pre-budget note.

Wearable brands, too, sought reduction in duty on raw materials. “To strengthen our local product cycle, we look forward to reduced excise duties on raw materials and improved logistics to ease the supply chain metrics,” said Arnav Kishore, founder and chief executive of Fire-Boltt, a wearable company. Kishore said the ‘Make in India’ initiative should be further developed to allow more companies to avail benefits and grow amicably. “The budget should also focus on special incentives and subsidies for consumer electronics and component manufacturing,” he added.