Department of Telecommunications asks for deemed category for telecom equipment export

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telecommunications towers against a gray skyMonday, August 18, 2014: Department of Telecommunications has asked the finance ministry to consider telecom gear’s deemed export status. It also includes mobile phones and other components and this consideration will boost local production and domestic makers. They feel that the higher production cost has affected them a lot in comparison to global suppliers.

An internal note by DoT, as noticed by ET, says, “Deemed export status will allow domestic telecom gear-makers to avail of low-cost working capital finance and other export-linked incentives.” Local production coset of telecom products is 18-22 per cent more than overseas markets like China. Hence DoT feels that local producers are “handicapped” in comparison to global suppliers. Global suppliers get support from EXIM banks which provide low-cost working capital financing. If deemed export status is considered then local telecom gear companies can easily compete with foreign vendors.

As a major part of the telecom gear is imported and attracts zero duty, Indian telecom product makers are at a loss. On an average, telecom equipment of Rs 690,000 million is imported every year, as per the note. India’s import dependence in this particular space can also be reduced through this deemed status. A 10-year tax holiday has been sought by DoT, and also minimum alternate tax (MAT) exemption has been added for locally manufactured telecom products with Indian IPRs. If local gear manufacturers get incentives then it would be highly profitable too. DoT asked for “10-year tax holiday in a block of 15 years,” and also waiving “MAT payments on profits and gains from manufacturing.”

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