Electronics Industry Seeks Duty Structure Reform to Reduce China Import Dependency
The Indian Electronics Industry has identified critical duty structure problems that discourage domestic manufacturing and increase import dependency on China. Key issues include zero duty on capital goods versus 5-20% on parts, uniform 15% duties on automotive displays and inputs, and inverted duties on inductor coils. The industry seeks budget corrections including zero duty on capital goods parts and rationalized tariff structures to promote local manufacturing and reduce strategic vulnerabilities.
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The Indian Electronics Industry has flagged significant concerns about the current duty structure and is seeking corrections in the upcoming budget to address inverted tariff anomalies that discourage domestic manufacturing.
Capital Goods Duty Structure Issues
Industry representatives have identified critical problems in the current tariff framework for capital goods used in mobile manufacturing. The existing structure creates a problematic scenario where capital goods attract zero duty, while component parts face duties ranging from 5% to 20%. This inverted duty structure incentivizes companies to import complete machines rather than building them locally, undermining domestic manufacturing capabilities.
| Current Structure: | Duty Rate |
|---|---|
| Capital Goods: | 0% |
| Component Parts: | 5-20% |
| Industry Recommendation: | 0% on parts |
The industry has pointed to recent restrictions imposed by China on capital goods exports, highlighting how this import dependence creates strategic vulnerability for India. To address these concerns, the sector has requested rationalization of duties on capital goods parts to 0%, which would support domestic machinery manufacturing and reduce reliance on imports.
Automotive Display Manufacturing Challenges
The electronics industry has also raised concerns about the duty structure for automotive displays. Currently, both finished display products and their inputs attract a uniform 15% duty rate. This equal taxation structure discourages domestic manufacturing since there is no cost advantage to producing displays locally versus importing finished products.
| Current Display Duties: | Rate |
|---|---|
| Finished Displays: | 15% |
| Display Inputs: | 15% |
| Proposed Structure: | 15% finished, 0% inputs |
The industry has requested a revised structure with 15% duty on finished displays while reducing input duties to zero. This differential would create incentives for local production and help build domestic display manufacturing capabilities.
Inductor Coil Production Concerns
For inductor coils used in wireless chargers, the industry has identified another inverted duty scenario that hampers domestic manufacturing. Finished inductor coil products currently face 10% duty, while the inputs required to manufacture them attract a higher 15% duty rate.
This structure discourages companies from setting up domestic manufacturing facilities for inductor coils, as importing finished products becomes more cost-effective than local production. The industry has sought rationalization of duties on parts used in inductor coil manufacturing to promote local production capabilities.
Strategic Manufacturing Implications
These duty structure anomalies collectively create barriers to building a robust domestic electronics manufacturing ecosystem. The industry's budget recommendations aim to address these inverted tariff structures that currently favor imports over domestic production, particularly given the strategic vulnerabilities highlighted by recent Chinese export restrictions on capital goods.
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