GST related recommendations
Reduction of GST rates on components used for mobile phones.
GST rates on some products used in manufacture of mobile phones or use as a sub part of mobile phone are on higher side like parts of Battery, shield cover attracts 28% GST however the main product that is mobile phone is charged at only 12%. Since these subparts in general have no other use than to be used in Mobile phone it should be categorized in same GST rate bucket.
Suggestion: All parts and subparts which are used in the manufacturing of mobile phones should be taxed @12%as similar to GST rates of mobile phone as higher GST rates increases the cost of mobile phones hampering the manufacturing of phones in India. Further reduction in rate would ease some pressures on mobile phone manufacturers and also support the make in India agenda of the government.
Reduction in GST rate for products like power banks, television tuner cards, and web cams
Products like power banks are products are used by majority of consumers in their daily lives. These goods are used by the common man in day-to-day routine activities. Television tuner cards and web cameras also have a wide consumer base. Other similar electronic products are taxed @18% and applying the highest GST rate to such products would create a dichotomy. Further, the said goods cannot be considered either as luxury goods or as sin goods. The intent behind pruning the list of goods taxable at 28% was to maintain the highest tax rate applicable only for luxury goods. Also, keeping goods of common use in highest slab rate was inflationary in nature. Therefore, GST rate on common goods was reduced from 28% to 18%. The aforementioned goods fall under the highest rate slab category of 28% and by doing the same the ultimate burden of high tax rate is borne by the consumer. By keeping such a high GST rate will have the anomalous and unintended effect of impeding the growth and development of such industry in the country.
Suggestion: GST rates or the said products should be reconsidered and reduced to 18%.
Increase in refund limit under area-based exemption schemes
Presently, the limit of claiming refund under the area-based exemption scheme is 29% of the IGST and 58% of the CGST paid through cash (after utilization of input credit). This incentive is not enough and is not in line with the expectations of the industry that has been set up in such remote areas. Such low refund amounts may even result in loss for some units based in remote locations.
Also, there is no time limit fixed for giving such tax incentive and therefore has strain on working capital of the company.
- The limit of refund should be increased to 100% of CGST and 50% of IGST paid in cash (after utilization of input credit).
- The time limit for grant of such tax incentive shall be fixed.
Lack of input credit
Currently, there has been a disallowance of credit of tax paid on inputs and input services used directly or indirectly in construction of building or a factory including civil work. However, every manufacturer in the course of his business undertakes such construction of either building or a factory or both for furtherance of his business.
Suggestion: Such input credit directly or indirectly relating to construction of building or a factory should be allowed as a credit to a manufacturer as it motivates a manufacturer to extend its arms in various parts of the country and also helps in creating job opportunities in developing areas of the country. Further it also supports the government’s agenda of make in India.
Budgetary Support for Local Manufacturers of mobile phone
In India, Generally Budgetary Support is given to entities located in a specified Area by the Central Government, but very little support is given to the manufacturing entities by the State Governments in which these units are located which makes such entities less competitive.
Suggestion: In line with what is followed in our neighboring countries like China every state should be funded with separate budget to support local manufacturers in the state apart from the support from central government. There are many problems which local manufacturer face while operating its business in the state and this recommendation if followed would help such local manufacturers and attract new businesses apart from adding positive impact on ease of doing business agenda of the government.
Refund of Accumulated IGST/ SGST:
This is suggested to incorporate provisions that any accumulation of IGST due to local sales of products shall be refunded instead of carrying forward presently. This shall relieve industry from working capital blockage and shall help use of these fund in enhancing business.
Free Trade Agreements (FTA) with Consumption based economies
It has been observed that government has been signing free trade agreements with production based economies like Singapore, Thailand which is adversely impacting us as it is resulting in increased imports and huge deficit in forex reserves. Further it is impacting adversely the manufacturing units whose cost of producing is more than cost of imported products.
Suggestion: I is recommended to enter into an FTA agreement with consumption based economies like United states so that our exports can be enhanced to these economies creating positive impact on forex reserves and enhancing positive impact on make in India agenda of government with increased demand from consumption based economies.
@Technuter.com News Service