DoT backs plans for 10% custom duty on telecom gear

11 Aug 2014

India’s Department of Telecommunications (DoT) has backed the finance ministry’s plan to introduce a 10% customs duty on specified telecom products, on the basis that the measure would help Indian vendors compete with their foreign rivals. The Economic Times quotes an internal DoT note as saying: ‘The imposition of duty on specified telecom products will create a level playing field for domestic manufacturers who suffer severe disability due to poor infrastructure and inverted duty.’ The list of items subject to the duty includes equipment for mobile and broadband systems, but excludes around 220 elements covered by India’s zero-duty commitment under the World Trade Organisation’s (WTO’s) Information Technology Agreement (ITA-1). India is keen to promote its domestic telecommunications manufacturing business, but many of the proposals tabled to-date – such as an obligation for telecoms licensees to purchase a specified quota of their equipment from local vendors – have seen the government accused of protectionism.

The proposed duty was criticised by India’s telecom operators, with lobby group the Cellular Operators’ Association of India (COAI) noting that the tariff barriers would further erode investor confidence in India, and invite retaliatory measures by countries exporting equipment to India. Further, an unnamed executive from an Indian GSM operator pointed out that: ‘Nearly 80% of the value of imported network gear comprises software which is IP [intellectual property]-protected and cannot be manufactured locally, which is why imposition of 10% customs duty will have no impact on reducing imports or increasing domestic manufacturing.’