Implications of GST Bill on Electronics Manufacturing in india

GST will have a positive impact on the electronics industry and is a much more preferred regime than its preceding one


Ashwini K Aggarwal, Chairman, India Electronics and Semiconductors Association (IESA) talks about the implications of the new GST bill and how GST would have a positive impact on the electronics manufacturing, He feels that the domestic manufacturing of electronics is on the rise led by mobile phones. Excerpts:

BW: Please enumerate your experience in the ESDM sector.

Ashwini K Aggarwal: It has been an exciting journey of more than three decades in IT and ESDM sector. Initial exposure to global marketing initiatives at HP were crowned with an industry accolade of the most favoured manager in the industry in 2006.

I have been exposed to an intoxicating exposure to R&D and manufacturing ecosystem in the nanotechnology to end-device ESDM ecosystem spectrum over the last decade. Imagine working with the industry to map the entire solar supply-chain, estimating demand in a virgin market at different levels of the supply-chain and mapping manufacturing enablers for India’s solar vision.

Imagine working with academia to create cutting edge R&D projects for energy storage, sensors and flexible electronics...Imagine creating the next generation engine for successful startups in ESDM space.

Imagine working on enablement of ultra-mega projects in solar, display and semiconductors (projects that are conceived with capex of Rs. 17-20000 crores investments).

We are at an interesting turning point in the Indian ESDM journey...there are visible green shoots of manufacturing and with the results of ease-of-business actions in the government and path-breaking policies...we can expect our local manufacturing industry is going to break out of the cocoon and take it’s legitimate space in the global markets.

BW: What are the implications of the new GST bill and for the electronics manufacturing in India?

Ashwini K Aggarwal: GST will have a positive impact on the electronics industry and is a much more preferred regime than its preceding one. The few salient points in favour of GST are mentioned below:

* Earlier, there were two to three levels of indirect taxation, which were subjective. As a result, they could be interpreted differently by the taxman. The GST Council has classified IT services in the 18 percent tax slab. Earlier, IT services were taxed at 13-15 percent, but there were a lot of indirect taxes and areas that were open to interpretation.

* After the implementation of GST, everything has moved online and there is no manual interference which will help in the transparency

* Smartphones currently attracted 2 percent central excise duty, while VAT rates varied from state to state and was in the 5-15 percent. Weighted average VAT rate on smartphones works out to about 12 percent. Thus, the present total tax incidence on smartphones works out to more than 13.5 percent. As against this, the proposed GST rate for smartphones is 12 percent

* Medical devices will also witness a lower tax burden with the GST rate pegged at 12 percent instead of the current incidence of over 13 percent, which includes 6 percent central excise duty and 5 percent VAT

* Electronic products like laptops and desktops, tablets, LED lights, accessories, etc. will also get cheaper with the implementation of GST.

* All these reduction in prices will boost the electronics demand in India. With so many mobile phone companies opening manufacturing facilities in India in the last two years, and this will be a highly motivating cause to expand their operations in the country.

BW: How has been the influx of foreign companies setting up manufacturing units in India

Ashwini K Aggarwal:  Foreign direct investment (FDI) inflows in India’s manufacturing sector grew by 82 percent year-on-year to US$ 16.13 billion during April-November 2016.

Apple plans to produce iPhone SE at an upcoming facility in Bengaluru, owned by its partner Wistron, which has upgraded the plant to assemble Apple iPhones.

Panasonic Cotp., the Japan-based electronics company, plans to set up a new plant at Jhajjar, Haryana, to manufacture refrigerators for the Indian market, and a Research and Development (R&D) center for appliances consisting of two technical divisions to strengthen its product development in the country.

BSH Home Appliances Group, the leading home appliances manufacturer in Europe, inaugurated its first technology centre in India at Adugodi, Bengaluru, which will enable the company to further develop localised technologies for the Indian market.

China based LCD and touchscreen panel manufacturer, Holitech Technology, has announced plans to investing up to US$ 1 billion in India by the end of 2017. Chinese firms like Huawei, Lenovo Motorola, Xiaomi and Gionee and home-grown brands such as Intex, Lava, Karbonn and Micromax have been assembling products in the country.

Indian companies can also export mobiles to the neighbouring and East Asian countries. These plants manufacture 20 million phones every month. There are ample number of investments coming into India, apart from the above mentioned, and due to the success of these companies, India is gradually progressing towards becoming an export hub as well.

BW: What is the overall impact of current policies with respect to manufacturing and Make In India?

Ashwini K Aggarwal: With the implementation of the various policies like Make in India, MSIPS, EMC and EDF, etc., the domestic manufacturing of electronics is
on the rise led by mobile phones.

The value of mobile phones assembled in India has increased 373 percent in the last two years, from Rs 19,000 crore in 2014-15 to more than Rs. 90,000 crore in 2016-17. About 40 mobile phone making plants have started since PN Modi announced the Make in India in September 2014.

We are at a stage where the initial mSIPS projects are going to get their grants released in the next four months. It will bring a tremendous wave of positivity in the market. The naysayers who were pointing out delays were ignoring the project operationalization times and the learning curves associated with setting up the grant processing engines. The emergence of real projects, real grant releases, real jobs will start a chain reaction..

We see tremendous opportunity for the Indian ESDM ecosystem.  A key policy imperative is ‘jumpstarting startups’ – IESA is leading this wave with a cutting edge execution of tested, hands-on teaching pedagogy; innovation –to-incubation thru a focussed incubation centre ; and a scale-up program thru an acceleration infrastructure.

The model – tested and operationalized at partner institutes by NETRA (IESA’s talent development arm) – is seeing a pipeline of startups addressing real industry needs, and ‘successful startups’

We believe that India will soon become a global manufacturing destination with support from the Government of India and several policy incentive approvals in the last few months.

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