Budget 2015: Tax Holidays To Help Digital, Mobile Cos

by CXOtoday News Desk    Feb 18, 2015


The government is reportedly coming up with an incentive package in the upcoming Union Budget to encourage manufacturing of electronic hardware including mobile phones and laptops as part of the ‘Make in India’ campaign, of the government launched last year, which aims at making the country a hub for global manufacturing.

As some announcements to this affect are likely to be made in the Budget by finance minister Arun Jaitley on February 28, industry heads are already pitching for a package of incentives. As, the Department of Electronics and IT (DeitY) has suggested that the finance minister should look at providing 10 year tax holiday for manufacturing of mobile handsets, tablets, laptops, desktops and telecom equipment.

A senior official told PTI that a ten-year tax holiday should be made available for fresh investments in a span of 15 years in special economic zones, domestic tariff area, export oriented units and Electronic Hardware Technology Park.

Introduction of tax holidays will also help new-age digital companies and entrepreneurs expand their business and provide growth impetus to the fledgling industry, according to IAMAI. Currently, there is no income-tax holiday available under the IT Act for digital companies.

“Internet and mobile companies engaged in the business of development of new technology or application, specifically in the field of local language internet and creation of content, be provided with an incentive of a weighted deduction of 200 per cent of amount spent on research and development of application/content,” Internet and Mobile Association of India (IAMAI) President Subho Ray.

Besides tax holiday, DeitY has recommended removal of special additional duty from inputs and components, differential excise duty structure for laptops and desktops and 5% interest subsidy scheme for the electronics industry.

The DeitY has observed that interest rate of around 14% is too high as the competitors in other nations can access funds at 3-4%. These suggestions, sources said, are aimed at increasing India’s capability in manufacturing of electronic hardware besides promoting ‘Make in India’ programme

The department has also made a case for extending 5% Focus Product Scheme to push exports of hardware industry. Currently, India imports electronic goods worth $35 billion every year.

“The government should be introducing policies that encourage local manufacturing of mobile phones and help increase mobile phone user base in India,” states Pardeep Jain, Managing Director of Karbonn.

The demand of mobile devices is increasing and domestic manufacturing has not been able to match up to the ever-changing needs of Indian mobile market, he believes and therefore, the need of the hour is to boost manufacturing to save money by reducing imports and increase the export of homegrown products. Addition to that, the favourable policies along with locally manufactured products alongside campaigns around Digital India initiative will help in developing a digital environment in the country, he believes.