Mobile handset makers have asked the Department of Electronics & Information Technology (DeitY) to bring back the old rule of bank guarantee for importing parts for mobile manufacturing, in place of the surety condition, which was introduced in the new customs rules or IGCR, 2016.
In a letter to Diety Secretary Aruna Sharma and Department of Revenue Secretary Hasmukh Adhia, Pankaj Mohnidroo, national president of the Indian Cellular Association (ICA) said that the change in the customs rule has led to an increase in the transaction cost and compliance cost. The industry is burdened with huge compliance cost.
According to him, these issues are suffocating the potential of the manufacturers to optimize on their manufacturing capacity.”We feel that given limited number of producers each with substantial capital assets, additional check of surety serves little purpose,” he added.
ICA said that the surety condition for parts import covers around 27% of the input value, which means around Rs 10,000 crores working capital gets locked up with interest cost of Rs 1000 crore per month besides administrative costs of compliance.
“Amendment to replace bank guarantee with surety also not working as industry has to fall back on guarantee due to lack of resources for surety, especially in case of FDI companies. We request immediate reversion to old system with simple undertaking with bond,” Mohindroo said.
In Budget 2016, IGCR were formulated by replacing the earlier scheme with a view to streamline the procedure for import of goods for further manufacture. While many concerns of the industry were taken care of, ICA says that a certain changes brought about in the scheme have made the scheme more rigorous compared to the rules which IGCR have replaced.
The handset association has also urged for an amendment in the rule for the utilization period of the imported goods for mobile manufacturing to the earlier six month period, from the current three months, which has taken away the cost advantage of bulk buying.
In addition, the ICA has also said that the field formations have not yet fully accepted the new IGCR rules which has substituted permissions with self declaration. Many field formations are requiring approval as if the earlier system of applications is still in place.
Under the new dispensation only information needs to be provided to the authorities, which should be followed with self declaration, except in cases where utilization is not within the set period of three months.
“It is requested that suitable instructions and guidelines on the subject be issued to the field formations so that the intention of the Government is communicated and reiterated,” the association said in its letters.