The Electronics System Design and Manufacturing (ESDM) industry would receive a major boost with the introduction of GST in terms of attracting foreign investment and creating a level-playing field, an industry body said recently.
In a major step towards the ‘uniformed tax’ economy, a council of federal and state governments, announced the four main tax slabs 5 percent, 12 percent, 18 percent and 28 percent under the proposed Goods and Services Tax (GST). The council has proposed 12 percent to 18 percent tax slabs for consumer durables and electronics, whereas, white goods will be taxed at the rate of 28 percent.
“Once the GST is introduced, the total tax rates will actually come down. So, it is something the industry is eagerly looking forward to,” India Electronics and Semiconductor Association (IESA) President M N Vidyashankar said.
IESA is the trade body representing the ESDM industry in India.
“Our (ESDM industry) maximum rate (GST tax structure) is going to be around 18 per cent,” he said but added that “It (GST tax structure) depends on the Council. One does not know”.
“It (GST) will bring in an element of certainty. Today, there is lot of uncertainty. Competition between the states will be on an even keel”.
Earlier, states were engaged in one-upmanship to offer lower rates to attract investment but it would now be a thing of the past once GST is implemented. Now, comparative advantage like merit, resources and manpower, and a level-playing field would come into force. “It will introduce transparency and accountability,” Vidyashankar said.
“In reference to the ESDM industry in India, he said, “It (GST) will give a major boost, particularly in attracting investment from outside and promoting partnership and collaborations with Indian companies.”
Vidyashankar recently said investments up to Rs 2 lakh crore are expected in India in the ESDM space within the next four years.
However there is skepticism as well, as there is no immediate clarity on the classification of electronics under the proposed tax slabs.
Channel partners say that the proposed 12 percent tax rate will boost the growth of the industry at large, while the 18 percent will not have much impact on the resellers’ business. At present the tax on electronics, including some of the IT products ranges between 15-16 percent.
Whereas, Confederation of All India Traders (CAIT) said that that irrespective of rates, there should be one single return and single authority to control the taxation system and only then the tax net will be widen and revenue will be increased.
Manufacturers’ Association of Information Technology (MAIT) is optimistic that the GST tax structure being discussed will be in favor of the ICT industry. “MAIT is very keen to see Implementation of GST, which can potentially transform the Indian economy into a major global player. While the direct benefits would be on account of simplification of tax collection process, we foresee substantial increase in revenue collections that would enable government to enhance infrastructure spending. The spending on e-Governance would also fuel demand for IT products,” said Nitin Kunkolienker, Vice President, MAIT.
Welcoming the new announcement, Federation of Indian Chambers of Commerce & Industry (FICCI) said that the new tax regime would help in controlling inflation. “The rate structure will achieve the twin objective of protecting the revenues of the central and the state governments and further containing the inflationary pressures that may arise consequent upon the change of the taxation system,” FICCI said.
The implementation of the new pan-India indirect tax regime will start next fiscal in April 2017.
