DoT recommends lower VAT for mobile phone manufacturers

In order to increase mobile phone manufacturing in the country the Department of Telecom has sought a 15-year tax holiday on domestic production of handsets along with a lower VAT rate among other relaxations. As per a report by PTI, an official stated, “Domestic market demand for mobile phone is expected to hit 1 lakh crore for the first time in 2015 and mobile production is on decline. In Vietnam, there is tax holiday of 30 years where a lot of manufacturing has moved. DoT has thus sought 15-year tax holiday for domestic mobile production.”

According to a report by ICA, the export of mobile phones is set to come down to zero this year from Rs 2,450 crore estimated in 2014. The main cause of this is the shutdown of the handset manufacturing plant of Nokia located in Chennai. The data further suggests that mobile phone export touched its peak point of Rs 12,000 crore in 2012 and since then it is decreasing.

 DoT has also recommended that the finance ministry should levy uniform VAT of 4 to 5 percent as compared to 8.8 to 15 percent. If the government implements this, then the prices of mobile devices will also go down. Along with this, the department also suggested the extension of section 35 AD of Income Tax Act on mobile phone, tablets and their accessories producers which allows 150% deduction of capital investments for calculating tax.

The government has also situated a joint task force in order to revive the mobile manufacturing ecosystem in the country.