Telecom service providers that typically bear cost of imports of telecom gear decried the move saying it would potentially ‘break the back’ of the industry already reeling under a debt of Rs 5 lakh crore. However, Telecom Equipment Manufacturer’s Association (TEMA) welcomed the move as it would give a fillip to local manufacturing.
The government said that it was ‘satisfied that the import duty leviable’ on telecom transmission equipment, specifically telephone sets and base stations, ‘should be increased and that circumstances exist which render it necessary to take immediate action’, in notices issued by the Central Board of Excise and Customs, on June 30. According to government officials, the decision was taken after holding consultations with the industry and stakeholders through an inter-ministerial committee (IMC) which was also taking the call on imposing duty in mobile phones, again to protect investments into local manufacturing.
“Base stations are a non-ITA item, and the move has been done in the internet of Make in India,” a senior official in the telecom ministry told ET. Information Technology Agreement is a global agreement under which countries have committed to exempt certain electronic and telecom products from customs duty. The Cellular Operators Association of India which represents top telcos including Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio, said it was ‘disappointed’ by the move, even as TEMA chairman NK Goyal supported the move aimed at protecting local industry and manufacturing.
“An increase in key input costs, like BTSs, upon which telecom networks depend, would significantly slow-down and potentially stop the expansion of communications services, especially to parts of the country yet uncovered,” said COAI director general Rajan Mathews, underlining the increase in GST rate for telecom services to 18 per cent from earlier 15 per cent, from July 1. This additional burden translates to a significantly increased expenditure at a time when the industry as a whole is in a phase of hypercompetitiveness, and reeling under a debt of Rs 5 lakh crore, making it impossible to pass on the increased expenditure to the consumer, the association added.
Gear makers Huawei and Nokia said that they were ‘studying and evaluating implication currently’, and expected more clarity in coming days. Earlier, a 10 per cent levy was imposed only 4G or LTE base stations, but the new notification encompasses all base stations, without differentiating between 2G, 3G or 4G. Increase in customs duty is set to make network rollouts costlier as more than 90 per cent of telecom equipment including base stations is imported, as per industry data.
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