“If India loses the case, not only will it have a devastating effect on tariffs of high-end phones, but in fact the entire range of mobile handsets manufactured in India,” Pankaj Mohindroo, chairman of the Indian Cellular & Electronic Association (ICEA), said in a letter to revenue secretary Ajay Bhushan Pandey, electronics and information technology secretary Ajay Sawhney and commerce secretary Anup Wadhawan. ICEA represents Apple, Foxconn, Flextronics and other device and electronic manufacturers.
The government has set a target of $110 billion for exports of smartphones from India by 2025 from the current $3 billion. If India were to lose the case, it would be compelled to cut basic customs duty on all handsets, which would erode manufacturing in India and flood the local market – even in the low-end segment – with cheaper imports from China.
The industry association reiterated its suggestion to unilaterally reduce duties on highend phones, especially those priced Rs 20,000 and above, to a flat rate of Rs 4,000 per device. ICEA said this will address the EU’s concerns and ensure that the government doesn’t lose money.
The basic customs duty causes an annual loss of Rs 2,500 crore to the exchequer due to smuggling of devices priced at Rs 50,000 and above and destabilises the business of Indian retailers who stock these phones, the association reiterated. ICEA said the industry was surprised that the government had increased the duty to 22% from 20% in the Union budget, which would widen the arbitrage in high-end phones, leading to more smuggling and causing greater losses to the exchequer.
“We are unable to comprehend why the government is continuing to take losses at the rate of Rs 200 crore per month, in spite of the fact that the industry has documented, in no uncertain terms, that this limited action targeting high-end phones could not only recover this loss but generate additional Rs 1,000 crore per year,” Mohindroo said in the letter.
He said the US was likely to join the EU in the tariff battle.
“We have confirmed news that the US government is under severe pressure from several Congressmen and senators to proceed against India, similar to the EU case at the World Trade Organization. The ICT tariffs were originally supposed to be a part of a bilateral trade deal with the US, which failed to materialise.
The WTO’s Dispute Settlement Body on March 5 considered a request from the European Union for a dispute panel to rule on India’s import tariffs on certain information and communications technology (ICT) goods.