Giving ten-year tax holidays for fresh investments and extending benefits under the Income Tax Act to mobile handset and tablet producers in the Union Budget 2015-16 would be crucial to the success of the government’s ambitious ‘Make in India’ programme, the telecom ministry has recommended.
While the domestic demand for mobile devices is likely to hit 1 lakh crore mark by the end of 2015, local production will be hardly one-fourth of the demand.
Adding trouble for the sector, a lot of manufacturing has moved to Vietnam due to a predictable regulatory environment and better incentives. So this is the right time to give a push to investment by sending the right signals through tax holidays, the ministry said.
“Ten year tax holiday on a block of 15 years should be granted on all profits from manufacturing of rendering of services to the mobile phone industry for all fresh investments in plant and machinery for special economic zones …” the ministry has recommended.
Finance minister Arun Jaitley should also extend benefits under Section 35 AD of the Income Tax Act to cover mobile phones, mobile tablets and their parts, and the telecom tower sector which is crucial to the success of ‘Digital India’ and ‘Make in India’ programmes, the ministry has suggested. This Section of the Act enables a shift from profit linked incentives to investments linked incentives.
The directorate general of commercial intelligence and statistics (DGCIS), in 2012-13 the country has imported telecom equiment worth Rs 61,539 crore and Rs 74,116 crore in 2013-14. So far proposals worth only Rs 1,200 crore has been received for the telecom equipment sector during the past two years, a telecom ministry official said.
The ministry is concerned that Nokia’s shutting down operations in its facility in the country from last year due to regulatory issues may hurt investments in the mobile sector and it is imperative to infuse fresh confidence among the investors.