“We have already received the first chunk of payments, and the second, we believe, is on its way. We have already invested in four other PLI schemes and we are also aiming to qualify for the PLI for IT hardware,” said Sunil Vachani , chairman, Dixon Technologies.
Vachani said for the first year of the handset PLI scheme—from October 2021 to March 2022—Dixon will receive a total of Rs 117.7 crore as incentives. The company is evaluating the incentives for the other quarters and will be submitting the papers for the same soon.
Besides Dixon, iPhone manufacturers Hon Hai Foxconn and Wistron are also eligible for incentives and are in the process of filing papers, which are being audited simultaneously. “The paperwork is massive and voluminous, and it is taking a lot of time to complete and audit them, which is the reason for the delay,” said an industry executive who wished not to be named.
” The industry looks forward to a seamless and soft touch payment mechanism of incentives including PLI. Onerous pre audits reduce enthusiasm and the credibility of the incentive scheme. A trust based payout system like self assessment will be best. Post facto random audit can be instituted ,” said Pankaj Mohindroo, chairman, India Cellular and Electronics Association.
Samsung, which was the only company to meet the production targets as a multinational company in the first year of 2020-21, had also filed for claiming incentives. However, even after the last meeting held two weeks back, their application was not cleared with officials saying it was still being scrutinized and audited.
Smartphone manufacturers have pushed back against the government for the delay in releasing the sops under the Rs 41,000-crore scheme.
“The government has been asking for more and more paperwork, delaying the release of the sops, even though the funds are there with the government,” said another industry official in the know.
He said the government had earned more than Rs 32,000 crore from GST each year from domestic sale of smartphones since 2020. “They hung the PLI stick on one hand and raised the GST rates on the other hand… Effectively, the industry has paid for the expansion by themselves.”
“The GST on mobile phones should have been 5% but was fixed at 12% — the 50% further increase to 18% was a very cruel hand deal to the industry,” Mohindroo said.
The government hiked the GST rate on domestic sales of smartphones from 12% to 18% from April 1, 2020, in a bid to correct the inverted duty structure.
Following the hike, and the jump in domestic smartphone sales due to the Covid-19 pandemic and the PLI scheme, smartphone brands have earned a total of around Rs 2 lakh crore every year since 2020. However, they had to pay an additional Rs 12,000 crore to the government due to the increased GST rate.
But Bipin Sapra, partner-indirect tax policy at Ernst and Young, said it would be wrong to consider income from GST payments being the fund that powers the PLI scheme. That is because the proceeds from GST are divided between the Center and states, while the outlay for the PLI scheme is entirely from the Centre’s coffers.
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