10% duty will add to capex burden by Rs 1,000 crore: COAI

The burden will further affect the already upset financial health of the sector

Industry body COAI has said that 10% duty imposed on telecom products that fall outside the WTO pact will result in added capex burden of Rs 1,000 crore, while appreciating budget proposals like setting up of National Rural Internet and Technology Mission.

"Levy of this 10% duty will also result in an added capex burden on the GSM industry of an estimated amount of Rs 1,000 crore, approximating 10% of the estimated value of import of goods i.e. Rs 10,000 crore, further affecting the already upset financial health of the sector," Cellular Operators Association of India (COAI) said.

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.

India has signed ITA 1 as a member of World Trade Organisation (WTO) in March, 1997 which, analysts have said, has finished off the electronics manufacturing industry in the country.

Under this agreement, member countries should allow duty free import of products falling under eight categories covering telecom, computers and semiconductors like mobile phones and electronic chips.

The association, which represents companies like Airtel, Vodafone, Idea Cellular, Uninor, said that deterring policy on import of equipment could adversely affect the performance of the networks, eventually resulting in poor quality of services for consumers.

COAI said while the industry appreciates efforts to boost the domestic manufacturing sector, it feels that this should be done in a manner wherein the required infrastructure and manufacturing capacity is facilitated, instead of discouraging imports through such rigid measures as 10% customs duty on some telecom products.

"It is also pertinent to note here that presently, many of the items, which are critical for the networks, are not manufactured in India and are not even expected to be manufactured shortly," COAI said in a statement.

The association appreciated allocation of Rs 7,060 crore for 100 smart cities, extension of a 10-year tax holiday to power projects that are completed by March 31, 2017, allocation of Rs 1,000 crore for the solar power and setting up of National Rural Internet and Technology Mission, among others.

The association expressed disappointment on the issue of retrospective tax amendment.

"We are disappointed that the government has not taken a bolder step in dealing with the retrospective tax measure. We hoped that the government would put an end to the matter by bringing closure to pending cases in light of the Supreme Court verdict," COAI Director General Rajan S Mathews said.

COAI's member Vodafone is embroiled in Rs 20,000 crore tax dispute with government due to retrospective tax amendment introduced by UPA government.