The Government of India has hiked customs duties on telecom equipment and has also imposed taxes on the printed circuit boards which are used in the manufacturing of the same. Products being imported from other countries like base stations, optical transport equipment, combination of one or more of Packet Optical Transport Product or Switch (POTP or POTS) have been levied with an increased customs duty of 20% in order to tackle the current account deficit situation in India along with propelling growth for the make in India program. Notably, the customs duties which were being levied on this equipment were only 10%; now the figure has doubled.
Custom Hike – an Effect of Account Deficit
Also, as per the new regulation and rates, the equipment which used to enjoy zero duties would also be levied with 10% of charge. As per the notification of Central Board of Indirect Taxes and Customs on Thursday, these new rates would come into effect starting today, i.e. October 12. Pulling up the data for the present and previous years, it’s apparent that India imported approximately $21 billion worth of telecom equipment in FY18, as compared to the $16.2 billion in FY17.
To tackle with a much more mainstream issue of current account deficit the customs duty on many more products has been hiked. These consumer goods products include air-conditioners, washing machines, refrigerators, footwear, jewellery, tableware, and furniture fittings. Further, aviation turbine fuel has also been levied with more duty as compared to the previous rates.
Situation Predicted to Worsen
These changes come as the result of current account deficit declining to 1.9% of GDP in FY18 down from 0.6% which was the rate in the previous year. However, the situation is only going to worsen as the deficit has been predicted to rise to the figure of 2.8% in the current year.
In the first five months of the FY, the trade deficit has grown to $80.4 billion against the $67.3 billion, which was the figure around the same time last year. Going by the words of a top executive in one of India’s top telecom equipment manufacturing company, this move is going to force the hands of telcos to procure equipment from local vendors thus reducing the dependence on international companies especially with the rupee getting weaker.