Appliances and consumer electronic (ACE) products should be excluded from the purview of free trade agreements with a view to boost domestic manufacturing and promote exports, a report has suggested. 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).
A report from PwC and CEAMA has asked the government to "consider excluding ACE products from the future FTAs, especially 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 Consumer Electronics and Appliances Manufacturers Association (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: "FTAs signed by India are with production-driven economies resulting in finished products from these countries being imported into India at a cost lower than what it would have cost to manufacture the same products in India."
"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.