Home / Budget / News /  Electronics sector seeks tax relief amid rising input costs

The electronics industry is expecting finance minister Nirmala Sitharaman to either extend the benefits under the remission of duties and taxes on exported products (RoDTEP) scheme to the sector or announce a cut in goods and services tax in her Budget speech on 1 February.

The government launched the RoDTEP scheme, replacing the Merchandise Exports from India Scheme, which violated global trade norms. It offers refunds on embedded central, state and local duties or taxes to an exporter.

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“RoDTEP is critical to address India’s deep disabilities vis-a-vis its competitors for boosting electronics manufacturing and making it India’s No. 1 export by 2025," said Pankaj Mohindroo, chairman, India Cellular and Electronics Association (ICEA).

“This needs to be an ongoing exercise to address the adverse impact on India’s competitiveness, of high taxes which remain unremitted. An early finalization of RoDTEP base rate and rates of priority products needs to be our immediate focus," he added.

The ICEA recommended a RoDTEP of minimum 1.5% on electronics exports from India.

Television manufacturers are also looking at a cut in GST rates for TVs. At present, 18% GST is charged for TVs up to 32 inches, and 28% for those above 32 inches.

Industry insiders said single GST rates across television sets would bring costs down.

“Today, although TV is no longer a luxury, yet due to high raw material costs, coupled with the applicable GST of 28%, both the consumer and the industry take a huge hit," said Arjun Bajaj, director, Videotex International, a contract manufacturer for smart televisions.

The electronics industry has also been facing rising cost pressures from the increase in transport prices.

According to industry insiders, ocean freight prices have tripled over the past two quarters, while prices of raw materials such as copper and aluminium have also risen. Television panel prices have increased to what they were five years ago.

The cost of transportation from China to India via ships has increased by three to four times, pushing up prices of components. Also, demand for some components such as integrated circuits and panels has outgrown the supply.

Panasonic is expected to raise prices of TV sets by 6-7%, while LG may increase prices of TVs, refrigerators and washing machines by 7-8%.

TV manufacturers are not the only ones asking for a relief in GST rates.

Indian mobile handset manufacturers are also urging the government to reduce GST rates to 12% from the existing 18%. In March 2020, the GST Council had raised rates on mobile phones from 12% to 18%.

The ICEA has also urged the government to extend the new production-linked incentive scheme to other sectors, including for laptops and tablets, printed circuit board assembly, wearables and display fabs.

“We expect the government to initiate some production-linked incentive scheme to reduce the import dependence on China and boost domestic manufacturing. With this, we expect the government to make sure that this initiative will be utilized by both large multinational corporations and small and medium enterprises," said Arnav Mutneja, founder, ZinQ Technologies, a gadgets and accessories maker.

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