India has not broken any global covenant by implying 10% import tax on smartphones and is all set for any argument that may occur at the World Trade Organization (WTO), claimed government administrators. The 10% Basic Customs Duty (BCD) on handset imports came lively from July 1, 2017 as the Goods And Services Tax (GST) was introduced, and is targeted at safeguarding domestic manufacturing. The decision follows planning for more than a month, and is supported by legal outlook from the General Attorney.
“Handsets did not exist when we made the Information Technology Agreement (ITA-1) deal. So, there is no compulsion and, hence, no infringement if we imply any tax on these goods,” claimed a Commerce Ministry Administrator. The pre-GST tax organization made handset imports 11.5% pricier than home-made smartphones, making a duty gap that incentivized domestic manufacturing.
But a GST rate of 12% on handsets would have washed away the benefit. By implying a BCD rate of 10%, the government has made sure that incentives for domestic manufacturing will stay intact even in the reign of GST.
But the decision has been convoluted by the fact that India is a participant to ITA-1, an international contract below which nations have promised to let off certain telecom and electronic goods from customs tax. Analysts, who have blamed the contract accountable for wiping India off the international manufacturing map, fear that the decision of New Delhi could be the cause of a long-drawn argument at WTO and that the nation will have to protest it cautiously.
“Most handset component producers are located in South East Asia and are also a division of the value chain, which concludes in China, where handsets are accumulated. These nations, besides the U.S., might challenge our country at WTO,” claimed a Delhi-based analyst on WTO problems.
Another analyst concerned that India will have to walk cautiously in case it encounters the same destiny as in the solar panels argument, where it lost the grounds to the U.S. and the “Make in India” initiative undergone a big slow down. But the government is preparing for a protest. “If there is an argument, we will protest back,” the Commerce Ministry Administrator claimed.