DoT moots 15-year tax holiday for mobile handset makers

In step with Prime Minister Narendra Modi's 'Make in India' campaign, the Department of Telecommunications has sought a 15-year tax holiday on domestic production of handsets and a lower uniform VAT rate, among other relaxations.

"The domestic market demand for mobile phones is expected to hit 1 lakh crore in 2015, but mobile production is on the decline. In Vietnam, there is tax holiday of 30 years where a lot of manufacturing has moved. DoT has thus sought 15-year tax holiday for domestic mobile production," an official was reported as saying.

The recommendation by the DoT's investment cell comes ahead of the union budget due to be announced next month, and is based on input from industry bodies.

A report of the Indian Cellular Association says mobile phone exports are expected to fall to zero in 2015 from Rs2,450 crore in 2014, mainly on the government's suspensions about handset production at Nokia's Chennai plant.

Exports of mobile phones have been declining after touching a peak of Rs12,000 crore in 2012. Exports in 2013-14 crashed by over 70 per cent to Rs2,450 crore from Rs1,850 crore in 2013.

The DoT has also suggested that the union finance ministry levy uniform value added tax of 4-5 per cent compared to 8.8-15 percent VAT levied across country. This, if implemented, will lead to reduction of mobile phone prices.