The Hindu Business Line : Special duty waiver on handsets made in SEZs goes

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New Delhi Feb 27 In a move that could hurt the plans of mobile handset manufacturers in the country, the Government has withdrawn the exemption of 4 per cent special additional duty on handsets manufactured in Special Economic Zones. The Ministry of Finance issued a notification to this effect on February 21.

A number of companies including Nokia and Samsung have started manufacturing handsets in the country while others like Motorola and Sony Ericsson are in the process of setting up a plant.

According to the Indian Cellular Association which represents the interests of handset manufacturers, the notification will jeopardise these plans as it would eliminate the cost difference between imported handsets and those manufactured at the SEZs.

"The entire Sriperumbudur SEZ region consisting of the three biggest world-class companies and more than 20 upcoming ancillary industries will come to a grinding halt following the notification. We hope this will be rectified," said Mr Pankaj Mohindroo, President, ICA.

Earlier the Government had carved out three windows with zero-duty environments, that is, SEZs, Export Oriented Units and Domestic Tariff Area. However, the February 21 notification has introduced 4 per cent duty in the SEZ environment, making the Sriperumbudur SEZ areas non-competitive compared to other units in the EOU and DTA environments located elsewhere in the country. "The SEZ units are now on the same footing as imported goods with regard to customs duty, but the SEZs are not competitive with imported China-origin goods given the over-high transaction costs in India and relatively poor quality of infrastructure," ICA said.

Handset manufacturers have requested the Communication Ministry to intervene. "At a time when the UPA Government is promoting manufacturing in India, this step will jeopardise plans made by a number of companies. This anomaly needs to be rectified," said Mr N.K. Goyal, Chairman Emeritus, Telecom Equipment Manufacturers Association of India

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