ACE products should be excluded from FTAs: Report

A report by PricewaterhouseCoopers (PwC) and Consumer Electronics and Appliances Manufacturers Association (CEAMA) suggested that appliances and consumer electronic (ACE) products should be excluded from the purview of free trade agreements (FTA). This would help boost domestic manufacturing and promote exports.

It has asked the government to not cut or eliminate import duties in this sector under the proposed mega trade deal Regional Comprehensive Economic Partnership (RCEP).

India has signed FTAs with several countries such as Singapore, Thailand, and ASEAN.

Under an FTA, each country is required to gradually reduce and eventually eliminate tariff rates on the other country’s goods, which also include electronic goods as per a pre-decided timeline for implementation.

According to CEAMA, the ACE sector has witnessed a flat growth in the first half of the ongoing fiscal on account of devaluation of Indian rupee and other factors.

The report said that the FTAs signed by India are with production-driven economies. As a result, finished products from these countries have been imported to India at a cost lower than the manufacturing costs of the same products in India.

It also stated, “This factor combined with the fact that in most cases, components of the finished products are subject to import duties at rates higher than the duties applicable on finished products, the FTA has contributed to the decline of the manufacturing of products in India.”

The report also suggested to provide subsidies to locally manufactured products to help them compete with fully finished goods imported at zero duty under the current FTA agreement.

“India should focus on signing FTAs with consumption driven economies to promote export and focus on ‘Make in India’ for the world,” the report said.

It suggested to treat the entire consumer electronics segment as a single category under GST to ensure uniformity in GST rate and provide incentives in the form of subsidies to consumers to encourage them to shift to higher star-rated energy efficient appliances.

The report also recommended incentivisation of R&D undertaken in India to build domestic capability to make components that are currently unavailable in India.

“Also some consumer durables are considered luxury products from a GST perspective. With changing lifestyle patterns and consumer aspirations, such products have now become a necessity that warrant revisiting the tax structure and rates,” it added.

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