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Is Make in India losing its edge, at least when it come to mobile phone manufacturers?
A new report in the Financial Express says the Supreme Court has set aside the 11.5% tax advantage that had spurred almost all local manufacturers to set up assembly or manufacturing units in India.
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As per the Financial Express report, this is what has happened:
In the Budget, Finance Minister Arun Jaitley brought in a 1% excise duty for mobile phones manufactured in India while hiking the CVD to 12.5%. The resultant a 11.5% difference was good enough to make big smartphone companies think of shifting manufacturing to India.
On March 1, the CBEC issued a notification saying the excise duty/CVD would be 12.5% and 1% in case no Cenvat credit was being asked for.
However, now the Supreme Court has ruled that since importers were not availing of Cenvat credit either, they had to be treated on a par with local suppliers who did not avail of the credit.
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With this ruling those who were thinking to ship components to India for local assembly, and maybe initiate full manufacturing as the ecosystem develops, have lost their advantage.
The report quoted a Huawei spokesperson as saying that the SC ruling was a “disincentive” as it restores parity between the excise and import duties. Micromax, however, said its “game plan on domestic manufacturing remains unchanged and we would continue to pursue this strategy.”
