Lok Sabha Question No. 2459 (UNSTARRED), answered on 2017-07-31
Subject: Foreign Companies in Manufacturing Sector
Ministry: COMMERCE AND INDUSTRY
Asked by: AJAY (TENI) MISRA

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION

## LOK SABHA

## UNSTARRED QUESTION NO.2459.

TO BE ANSWERED ON MONDAY, THE  31 ST  JULY, 2017.

## FOREIGN COMPANIES IN MANUFACTURING SECTOR

## 2459.  SHRI AJAY MISRA TENI:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:

## वाणिज् यवव द्यग ं ्री

- (a) whether  some  foreign  companies  are  making  efforts  to  set  up  i-phone  and other manufacturing units in India and if so, the details thereof, company-wise;
- (b) whether the said foreign companies are demanding to end the condition of 30 per cent local sourcing of component and rebate in customs duty on import of equipment and if so, the details thereof; and
- (c) whether  the  Government  is  considering  to  give  this  rebate  to  the  said companies and if so, the details thereof and if not, the reasons therefor?

## ANSWER

## वाणिज् यवव द्यग ााज् यं ्रीस् वतं ््रभााा(स्रींतंरीिरंमलााीरीतंाांि( THE MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY OF COMMERCE & INDUSTRY (SHRIMATI NIRMALA SITHARAMAN)

- (a): As  per  extant  FDI  policy,  foreign  investment  up  to  100  percent  is permitted  for  a  company  engaged  in  the  business  of  manufacturing mobile phones. Under the automatic  route, investment in the country can  be  made  without  prior  approval  either  of  the  Government  or  the Reserve  Bank  of  India.  Moreover,  FDI  is  largely  a  matter  of  private business  decisions,  and  therefore,  no  such  details  regarding  efforts made by foreign companies to set up i-phone and other manufacturing units in India can be maintained.
- (b) & (c): Government has received representations seeking concessions including 30 per cent local sourcing of component, duty exemption on manufacturing  and  repair  units,  components,  capital  equipment  and consumables for smart phone manufacturing and service/ repair.

As regards local sourcing requirement Government through Press Note 5  of  2016  dated  24.6.2016  provided  that  in  case  of  'state-of-art'  and 'cutting-edge  technology'  sourcing  norms  can  be  relaxed  subject  to

Government  approval.  However,  with  a  view  to  promote  domestic manufacturing  capacities  and  value  addition,  it  has  further  been provided  that  this  relaxation  will  be  valid  for  an  initial  period  of  three years from the opening of first store, and thereafter, such entities will be required to meet the domestic sourcing norms.

Further,  the  requests  regarding  rebate  in  customs  duty  on  import  of equipment  were  examined  and  the  same  were  not  accepted  on  the following grounds:

- i. Nil  basic  customs  duty  [BCD],  Nil  excise  Duty  /Countervailing Duties [CVD] [except charger, battery, and speaker] and Nil Special Additional Duty [SAD] has already been prescribed for components and  accessories  and  sub-parts  for  manufacture  of    parts,  for  the final  manufacture of mobile phones /tablet computers.
- ii. Further, Specified capital goods namely;
- a.  SMT lines;
- b.  Core test line;
- c. Electrovet oven;
- d.  Acoustic test lines BTO-SW;
- e.  Hot bar machine;
- f. Heat seal machine;
- g.  Pick and place machine; and
- h.  Older  paste  printer  for  manufacture  of  mobile  handsets  which have already been  exempted  from  BCD  with effect from 09.07.2004 [S. No 58 of Notification No 25/2002-Customs].
- iii.  There is no exemption from BCD, CVD and SAD on imports of parts for repair of mobile.
- iv.  Further,  in  GST  regime,  all  imports  will  be  liable  to  IGST and  any exemptions from CGST/SGST/IGST can be granted only based on the  recommendations  of  the  GST  Council  only.  Thus,  all  existing exemption  from  excise/  CV  duty  will  also  be  reviewed  by  GST Council.

Moreover, with effect from  01.07.2017,  10%  BCD has been imposed on cellular mobile phones [under tariff item 8517 12 10 and 8517 12 90]  and  their  specified  parts  namely  charger/adapter,  battery  pack, wired headset, microphone and receiver etc [except side key on which 7.5%  BCD  was  imposed].  Further,  exemption  from  BCD  has  been provided  for  inputs  and  raw  materials  for  manufacture  of  all  parts  of cellular mobile phones.

In addition, with effect from 01.07.2017 both domestically manufactured  cellular  mobile  phones  and  imported  cellular  mobile phones and parts for manufacture of phones attract 12% GST.

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