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What stakeholders are saying on CBEC’s 10% customs duty on 4G devices

The Central Board of Excise and Customs (CBEC) has proposed a 10% basic customs duty along with additional duty and cess on 4G equipment and smartphones, reports MoneyControl. Officials told PTI that “final tax demand will be decided based on the decision taken on whether it is exempt under ITA (International Trade Agreement)”. Basic customs duty on 2G and 3G equipment are however exempt but will attract a “countervailing duty of around 12.75%”, the report added. The duty on 4G equipment imports comes at a time when the country is moving on to the GST tax regime.

The new levies are yet to be finalised as the CBEC has not notified about this publicly on its site yet. But the additional levy has received mixed responses from stakeholders. Broadband India Forum (BIF), an association comprising of ISPs and tech companies (like Ericsson, Google, Huawei, Intel, Microsoft, Qualcomm, BSNL, Telenor, Facebook etc.) has pointed in a letter to Ministry of Electronics & IT (MeitY) that the levy is in violation of WTO’s Fair Trade Agreement (FTA) signed in 2011. MediaNama reviewed a copy of the letter.

Telecom companies including Airtel, Vodafone and Idea did not comment on the issue when MediaNama enquired; Airtel added that it is in “complete compliance of all regulations and have already been paying the requisite duties/taxes as per the Govt. rules”. While Ambani-led Reliance Jio (which imports equipment for its LYF devices) said: “This is an industry-wide issue regarding the applicability of customs duties on import of certain equipment and we await clarification from the Authorities. Reliance Jio is committed to 100% compliance of applicable regulations and will fully abide by the final decision taken by the Government.”

“Violating ITA agreement can lead to legal cases and retaliatory actions:” BIF

“There is apparently a view in certain (govt) quarters that imposition (of 10%) customs duty on imported smartphones is possible because there are not covered by ITA1. This is completely erroneous and…violates(s) standing FTA treaties with several countries,” BIF said in its letter. India signed the WTO agreement in 2011 along with countries 8 Asian like Indonesia, Malaysia, Singapore, and Vietnam among others. According to the agreement, these 8 countries “enjoy customs duty exemption on these goods (smartphones and related gadgets),” BIF added.

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As per an earlier government notification in December 2016 (pdf), mobile phones and network equipment (read Serial No: 1364, pg.32) did no attract any customs levies/duties. But these items are “covered under the (WTO Fair Trade) agreement and if imported from these countries shall qualify for 0% BCD (customs charge),” the association said in the letter. If India imposes a customs duty on imports from the countries mentioned above, it would lead to “serious legal challenges or retaliatory actions from these countries,” BIF said, asking the government to reconsider its stance.

GST received criticism from telcos and manufacturers in the past

Note that this isn’t the first instance that association and stakeholders have expressed concerns over various GST-based levies.
Telecom equipment tax: In May, the government clarified that mobile phones and related devices will attract a 12% overall tax. The Indian Cellular Association (ICA) consisting of phone manufacturers, however, told Economic Times, said that the “5% rate would be appropriate, as recommended by the ministry and…(govt) must maintain the differential duty for mobile phones for some time”.
Telecom services tax: COAI, a telecom association consisting of top telcos in the country, also expressed its concerns when the government said that telecom services will attract a uniform 18% tax.

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