Budget 2018: Appliances, consumer electronics firms seek lower taxes, custom duty rise on import

The Indian appliances and consumer electronics (ACE) industry has the potential to create 1.5 to 2 times more jobs than it does today provided it gets an ecosystem supported by favourable regulations and strong domestic R&D, says a recent PwC report. With just five days left for Union Budget to be announced, the top companies expect the Finance Minister Arun Jaitley to lower taxes and announce initiatives to boost domestic manufacturing. Around 25 per cent of the ACE industry products are still made outside of India; tapping it could provide a much-needed fillip to the sector and the Modi government's 'Make in India' initiative.

Since this is the NDA's last Budget before the Lok Sabha elections in 2019, and tax relief in appliances and consumer electronics could boost their demand, which could play well in the government's favour. Companies like Godrej Appliances, Panasonic, Philips Lighting and Intex, which holds a major share of the ACE industry in India, feel if the government lower taxes and increase custom duty on the import of products, there's a great chance a large part of the population that still can't afford basic consumer appliances like refrigerators and washing machines, etc could be covered under the segment.

The focus for the manufacturing of energy-efficient products could also prove to be a win-win situation for the industry and the government that aims to promote sustainability, say experts.

Limited domestic component ecosystem, high cost of finance and power, and inefficient infrastructure are key impediments in the growth of the sector.
"Consumer appliances as refrigerators, washing machines and ACs are no longer considered luxury items. Such consumer appliances need to be made more affordable to the consumers and be put in a lower tax bracket from 28 per cent to 18 per cent," said Godrej Appliances Business Head and EVP Kamal Nandi.

While, Panasonic is looking for a hike in the customs duty for ACE products category such as washing machines and refrigerators to encourage local manufacturing. "With the BCD hiked on items such as smartphones, TVs microwaves and LED lamps, we expect the union government to take similar steps on other durable items as washing machines, and refrigerators to further encourage localised indigenous manufacturing," said Panasonic India and South Asia President and CEO Manish Sharma.

Expressing similar views, Philips Lighting India said custom duty on all finished lighting products and luminaries should be raised as the government had done on import of LED bulbs. "We also welcome the recent increase in customs duty for finished LED bulbs from 10 to 20 per cent and hope that the government will extend it to all finished lighting products and Luminaires," said Philips Lighting India Vice Chairman and Managing Director Sumit Joshi.

While, Intex has asked for reduction of GST rates on parts and subparts as battery, shield used in manufacturing of mobile phones to 12 per cent from the present 28 per cent. "All parts and subparts which are used in manufacturing of mobile phones should be taxed at 12 per cent 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," said Intex CFO Rajeev Jain.

With PTI inputs