Budget 2021: Smartphone industry seeks more budgetary allocation, reduction in GST

The Union Budget 2021 will be presented on February 1 by Finance Minister Nirmala Sitharaman with major expectations from various stakeholders, hoping that the Budget may bear solutions to the slowdown in the economy in the wake of the COVID-19 pandemic.  The smartphone industry expects major changes in policies that will prove to be beneficial and the government are likely to bring in measures to help boost manufacturing as in 2020, the customs duty on cellular handsets was increased to 20% to discourage import and compel local manufacturing.

To put further impetus, Industry body India Cellular and Electronics Association (ICEA) has renewed its demand for reducing Goods and Services Tax (GST) for the mobile industry. Terming the GST hike of 50 percent in March 2020 as “a cruel blow” dealt with the industry, the ICEA told IANS that the rationale presented to the GST Council for raising the rate was “flawed”.

“To achieve the goal of smartphones in the hands of every Indian and to attain a domestic mobile phone market of $80 billion, it is imperative to reduce the GST on mobile phones from 18 percent to 12 percent,” Pankaj Mohindroo, Chairman, ICEA, said in a statement.

ICEA also recommended Rs 500 crore budgetary allocation for establishing various Centres of Excellence for the key areas of electronics development and a Rs 200 crore budgetary allocation for Mobile Design Centre.

The government is also expected to further push its ambitious ‘Make In India’ programme to electronics manufacturing and export hub. Mobile phone and component manufacturers on the other hand expect export incentives and lower GST on mobile parts to achieve the government’s vision.

The industry body sought interest subvention of 5 per cent for loans up to Rs 1,000 crore and credit guarantee of Rs 100 crore.

Regarding the homegrown handset makers, the ICEA said the “government is extremely supportive of building Indian champion companies which can be global leaders in the sub-$200 entry-level mobile phone segment”.

Another report titled “Modified Special Incentive Package Scheme (M-SIPS) 2.0”, the Internet and Mobile Association of India (IAMAI) has given suggestions that the incentive under M-SIPS for smartphone players should be raised to 30 percent of the capital expenditure to help offset the loss of revenue faced by companies when they move a component manufacturing facility to India. The report also advises on developing transport and logistics infrastructure, introduce labour reforms, and provide focussed skill training.