In a bid to boost manufacturing of electronic products in the country, Niti Aayog has put forward a recommendation to the government that it should not shy away from pushing production of low value products in the country that add value due to huge volumes .
In its recommendation on strategy for making electronics products in India, the government think tank said India should not “shun low value addition per unit. If produced on a large scale, low value addition per unit still translates in a large total value addition and large number of jobs,” comparing it with production of iPhones in China.
Tax uncertaintyThe Aayog has also proposed that the Department of Electronics and IT (DeitY) and the Department of Revenue should work towards ending tax uncertainty and simplify the tax regime.
“Clearly establish in writing the tax liabilities applicable to producers of electronic products under different circumstances in full detail; eliminate tax exemptions and simplify tax system; rollout GST (Goods and Services Tax),” according to a Niti Aayog statement.
The two departments should bring all input tariffs down to the tariff applicable to the final product and that the exports to be subjected to zero taxes, it said. The body pegged domestic demand for electronic goods at approximately $64 billion in 2014-15. In comparison, the world market in 2014 was $2 trillion.
10-year tax holidayThe government think-tank also pitched for a 10-year tax holiday for a firm that invests a substantial sum and generates a large employment within coastal economic zones. “For this purpose an investment threshold of $1 billion with the employment of 20,000 may be considered.”
While this is part of the Aayog’s recommendations to spur exports, it has suggested a similar sop to substitute imports by offering a ten-year tax holiday to anyone investing about $1 billion and creating around 15,000 jobs in the electronics industry.
“The objective of import substitution strategy is to expand the production of electronic goods in the short-run. It is, however, imperative to move ahead with the measures aimed at reorientation towards export simultaneously. This will ensure that the present opportunity to capture the large world market in electronics arising out of China’s rising real wages is not missed. This is also required to ensure that a future entrenched domestic industry does not rule out a switch to export oriented strategy.”
The think tank also made a proposal to modify preferential market access policy of DeitY to allow preference in government procurement, especially in the area of defence.The preferential market access policy mandates all state departments, organisations and agencies to procure at least 30 per cent of their equipment from the domestic market.
