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10% duty on telecom products to add to GSM Industry’s capex burden by Rs 1,000 crore: COAI

14 Jul 2014 Evaluate

Top mobile carriers such as Vodafone, Idea Cellular, Bharti Airtel and Reliance Communications will have to cough up more on Capex (capital expenditure) in the wake of the 10% duty on telecom products proposed in the Budget 2014. According to the industry body, COAI, the duty imposed on telecom products that fall outside the WTO pact will result in added Capex burden of Rs 1,000 crore for the GSM Industry, further affecting the already upset financial health of the sector.

The budget 2014-15 proposed imposing 10% duty on telecom products not covered under Information Technology Agreement (ITA) 1 of WTO to boost domestic production of telecom products. According to the pact signed by the country in March 1997, the country should allow duty free import of products falling under eight categories covering telecom, computers and semiconductors like mobile phones and electronic chips.

Further, COAI has also highlighted that policy on import of equipment could adversely affect the performance of the networks, eventually resulting in poor quality of services for consumers. It though acknowledged that the move would boost the domestic manufacturing sector, but felt that this could have been done in phased manner wherein the required infrastructure and manufacturing capacity is facilitated, instead of discouraging imports through such rigid measures. Besides, the association also expressed disappointment on the issue of retrospective tax amendment since its member; Vodafone is embroiled in Rs 20,000 crore tax dispute with government due to retrospective tax amendment introduced by UPA government.

Nevertheless, the industry body appreciated government’s proposal for allocation of Rs 1,000 crore for the solar power and setting up of National Rural Internet and Technology Mission.

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