The Ministry of Electronics and Information Technology (MeitY) is compiling a list of key imported electronic parts, used as inputs in consumer, appliances and high-end manufacturing, that it believes should qualify for lower tariffs, multiple people aware of the initiative told ET.
The list, to be shared with the Commerce Department, focuses on input items for key manufacturing segments, such as semiconductors, electronic appliances, and equipment, they added. There are components, duties and import conditions of which need to be relaxed to fully seize the manufacturing potential in areas like semiconductor chips, and chipsets, sources said.
“Apart from the 10 projects approved under the India Semiconductor Mission (ISM), a number of projects focused on chip assembly and electronic manufacturing services are also coming up. There is a need to reduce basic customs duties (BCD) on manufacturing inputs so that this impetus takes off,” said one of the people cited above.
Currently, project proponents under ISM are eligible for various tax benefits, including exemption from BCD on machinery, electrical equipment capital goods, other instruments, and their parts used in the fabrication of semiconductor wafers or in the assembly, testing, marking, and packaging (ATMP) of semiconductor chips.
Meanwhile, the domestic electronics industry has also pointed out that multiple, complex tariff slabs remain a challenge. This is despite the government removing seven tariff rates — leaving behind only eight remaining tariff rates, including ‘zero’ rate, after a comprehensive review of customs rate structure in the latest budget.
Tariffs and material costs result in a 5-6% disadvantage for assembly and 4-5% for components in India, as compared to China due to the high cost of inputs, the Niti Aayog had pointed out in a report on electronics manufacturing last year. Since then, the government has slashed the custom duties on 28 items used in mobile phone manufacturing in the latest national budget.
Import substitution
Sources said the exercise to further reduce import duties on electronics inputs, are not antithetical to the government’s plans of manufacturing them locally.
“While the recently closed electronic component manufacturing scheme (ecms) has seen major interest from the domestic component industry, the tariffs on electronic inputs remain a challenge, considering India’s average import duty levels remain much higher than East Asian competitors. At a time of heightened tariff volatility globally, lowering this becomes even more crucial,” an official pointed out. He added that even after duty cuts, other factors remain the same, he said.
The list, to be shared with the Commerce Department, focuses on input items for key manufacturing segments, such as semiconductors, electronic appliances, and equipment, they added. There are components, duties and import conditions of which need to be relaxed to fully seize the manufacturing potential in areas like semiconductor chips, and chipsets, sources said.
“Apart from the 10 projects approved under the India Semiconductor Mission (ISM), a number of projects focused on chip assembly and electronic manufacturing services are also coming up. There is a need to reduce basic customs duties (BCD) on manufacturing inputs so that this impetus takes off,” said one of the people cited above.
Currently, project proponents under ISM are eligible for various tax benefits, including exemption from BCD on machinery, electrical equipment capital goods, other instruments, and their parts used in the fabrication of semiconductor wafers or in the assembly, testing, marking, and packaging (ATMP) of semiconductor chips.
Meanwhile, the domestic electronics industry has also pointed out that multiple, complex tariff slabs remain a challenge. This is despite the government removing seven tariff rates — leaving behind only eight remaining tariff rates, including ‘zero’ rate, after a comprehensive review of customs rate structure in the latest budget.
Tariffs and material costs result in a 5-6% disadvantage for assembly and 4-5% for components in India, as compared to China due to the high cost of inputs, the Niti Aayog had pointed out in a report on electronics manufacturing last year. Since then, the government has slashed the custom duties on 28 items used in mobile phone manufacturing in the latest national budget.
Import substitution
Sources said the exercise to further reduce import duties on electronics inputs, are not antithetical to the government’s plans of manufacturing them locally.
“While the recently closed electronic component manufacturing scheme (ecms) has seen major interest from the domestic component industry, the tariffs on electronic inputs remain a challenge, considering India’s average import duty levels remain much higher than East Asian competitors. At a time of heightened tariff volatility globally, lowering this becomes even more crucial,” an official pointed out. He added that even after duty cuts, other factors remain the same, he said.
