Electronics cos ask finance ministry to extend 15% tax rate to old units

Electronics Reuters

Chennai|New Delhi:Electronics manufacturers are seeking clarity from the finance ministry on the incentives and exemptions available to them in the new concessional tax regime according to top industry executives. Some of these companies are also seeking an extension of the 15% tax rate–announced for new manufacturing units –to existing manufacturing units as well.

“We are in consultations with the Ministry to find out the applicability of various incentives enjoyed by the manufacturers in the 15% concessional tax regime,” an official of the Indian Cellular and Electronics Association, an electronics industry body, told ET.

He did not want to be named. “This will remove doubts in minds of investors and will speed up flow of investments into this sector,” the official said.

ICEA members include Apple, its suppliers such as Foxconn and Wistron and local electronics makers such as Lava International and Micromax.

Companies that have already invested in India should not be disincentivised for taking the plunge early compared to those who will set up fresh units from October this year, according to the Manufacturers’ Association for Information Technology (MAIT). George Paul, CEO of MAIT said India faces a “disability” of around 8% compared to competing economies such as China, Vietnam and Thailand. “Both existing and new companies face the same disability. It’s just that existing companies made their bets early on, so we have to help them compete better in global economy apart from offering the advantage to the new units,” he said.

Phone and component manufacturing units said the intent to accelerate investments has become apparent but the real flow of investments will take place after reading the fine print. These companies are also seeking clarity if existing benefits such as tax breaks under Special Economic Zone, capital subsidies and export promotion schemes will continue to be available under the new regime.

A government official told ET that companies can’t avail of any other income tax benefit if they are availing reduced rate of tax. “Everything has to be new if they want the 15% tax rate, else they can take advantage of the reduced corporate tax rate of 22%.”

As per ICEA, even some deductions such as Scientific Research Allowance– a sop for units in SEZs–and investment in new plant and machinery in notified backward areas, will not be available for both 15% and 22% windows.

Foxconn finds the concessional tax regime as a “very positive move though the finer details have yet to emerge, which should be very soon,” according to a top company executive aware of the company’s India plans.