India’s electronics industry wants India to fix an incentive rate of 2-4% on exports of mobile handsets, laptops, tablets, chargers and batteries under the newly launched Remission of Duties or Taxes on Export Products (RoDTEP) scheme, which replaced the Merchandise Exports Incentive Scheme (MEIS) from January 1, 2021.
The erstwhile MEIS offered a straightforward incentive of 2%-4% on the total value of exported products. India had to discontinue this scheme due to the World Trade Organization (WTO) pressure, which said that this distorted trade by providing direct subsidies.
The RoDTEP is a WTO-consistent scheme, which aims to reimburse the exporters Central and state taxes, duties and levies on electricity, fuel, transport, stamp duty, excise duty, power and other costs.
“RoDTEP is critical to address India’s deep disabilities vis-à-vis its competitors for boosting electronics manufacturing and making it India’s number 1 export by 2025. This needs to be an ongoing exercise to address the adverse impact on India’s competitiveness, of high taxes which remain unremitted.,” Pankaj Mohindroo, Chairman of India Cellular and Electronics Association (ICEA), said in a statement.
India has yet to notify incentive rates under the RoDTEP scheme. It had formed a three-member committee, which is currently deliberating upon new rates and may announce it in March 2021.
Mohindroo said that an early finalisation of RoDTEP base rate and priority products’ rates need India’s immediate focus.
“RoDTEP in itself is not a stronger scheme than MEIS, which pushed up electronics exports by 85% in 2017. But, coupled with the production-linked incentive (PLI) scheme, RoDTEP can offset major disabilities in manufacturing compared to countries like China, Vietnam and Taiwan, he added.
According to a recent report by the Economic Times, India is mulling a RoDTEP rate of 0.2-0.7% on mobile phones, far less than what was promised under the MEIS scheme.
The proposed RoDTEP rates would deliver an annual incentive of close to $16 million to handset companies.
As per media reports, incentives under the MEIS for FY19-20 was close to $72 million to handset companies. The Indian government hasn’t disbursed incentives to these companies in the ongoing FY20-21.
ICEA represents Apple, Xiaomi, Motorola, Nokia, Vivo, Motorola, Oppo, Realme and Indian brands like Lava and Micromax. It also represents contract manufacturers Foxconn, Wistron, Flextronics and Dixon along with various component vendors.
Mohindroo said that the electronics sector had become a central focus of the Indian government’s manufacturing policy. “RoDTEP is key to ensuring that Indian electronics exports regain the competitive edge. ICEA aims to make electronics India’s top export by 2025.”
Globally, electronics is a $2 trillion industry, dominated by exports from China, Vietnam, Taiwan and Japan.
“Electronics is amongst the largest traded commodities after oil. It provides India with a “tremendous opportunity” to become a global leader in exports,” Mohindroo said.
RoDTEP is critical since the government is targeting $1 trillion in exports by 2025 as part of the US$5 trillion GDP objective. “No country has reached the US$5 trillion mark without exports contributing at least 18-20%. India is no different,” the ICEA said in its report.