Hi-tech manufacturing in India likely to get boost

Number of incentives being given by the government

By H.P. Ranina/NRI Problems

  • Follow us on
  • google-news
  • whatsapp
  • telegram

Top Stories

Workers at an assembly line of mobile phones in Noida, India. — Reuters file
Workers at an assembly line of mobile phones in Noida, India. — Reuters file

Published: Tue 17 Oct 2023, 7:06 PM

Last updated: Tue 17 Oct 2023, 7:07 PM

Question: My friends and I would like to set up a manufacturing unit in India for components which are used for laptops and servers. We have been informed that the Indian Government is giving incentives to push the Make in India platform. Some of us are sceptical about this and would like to know the prospects for setting up a unit in India.

ANSWER: At present, around 10 per cent of the global IT hardware supply chain is fed from India. This amounts to about 10 per cent of world demand, equivalent to US$ 1 billion. The Indian government wants to increase this to 70 per cent over the next four years as the size of the IT hardware industry is expected to increase to around $30 billion by 2027. The components are for products such as servers, high performance servers for cloud, data centres’ servers, and for laptops and desktops. The Indian IT hardware ecosystem will include components and processes such as printed circuit board, memory units, chassis, PCB assembly, testing and integration. From November 1 this year, a Rs170 billion production-linked incentive scheme comes into effect for the IT hardware sector. Many foreign companies are setting up manufacturing units in the country to take advantage of this incentive scheme. The ultimate objective of the government is to make India the hub for device and server manufacturing, just as it has been successful in making India a hub for manufacturing smartphones. During the financial year ended March 31, 2023, export of smartphones manufactured in India crossed $11 billion. Even a well known Chinese brand of smartphones has decided to have them manufactured by an Indian company in Noida.

Question: While the rate of inflation has shown a downward trend in India, food prices have surged erratically in different parts of the country. Will the increase in prices be curtailed as a large section of the Indian population is affected by food inflation?

ANSWER: You are right that inflation has been driven by erratic rise in food prices, especially for vegetables, pulses, cereals, milk and milk products. However, food inflation has moderated in recent weeks as a result of better controls being exercised by the Ministry of Food and Consumer Affairs which has been cracking down on hoarders and price manipulators. The Reserve Bank of India has also been interacting with the ministry in order to ensure that food prices are kept in check, which in turn would have a significant bearing on RBI’s monetary policy. Interaction is also taking place among a group of ministers representing agricultural and commerce ministries to ensure that inflation remains within the comfort zone. The Food Corporation of India also has a major role to play as it is in charge of procurement, storage and movement of food grains. The government is planning to invest substantially in setting up modern silos and warehouses for enhancing the food storage capacity. The private sector has also been given tax incentives to set up modern warehouses, cold chain facilities and advanced logistical systems for movement of essential commodities.

H. P. Ranina is a practising lawyer, specialising in tax and exchange management laws of India.
H. P. Ranina is a practising lawyer, specialising in tax and exchange management laws of India.

Question: My firm, being headquartered in the UK, has deputed engineers to India. The Indian company has agreed to reimburse to the British company the entire amount of remuneration which the latter will pay to its engineers. Is the Indian company liable to pay Goods & Services Tax in India on the amount so reimbursed?

ANSWER: When the Indian company reimburses the remuneration paid by a foreign company in respect of its employees who are sent on deputation to India, Goods & Services Tax becomes applicable. This has been upheld by the Supreme Court of India, which has taken the view that since services are provided by the foreign company through its employees who are deputed to India, the Indian company while reimbursing the remuneration has to recover the Goods & Services Tax and pay it to the government by the due date. If the Indian company also reimburses the cost of social security benefits which are payable by the foreign company in respect of its employees, GST would also be payable on such amount which is reimbursed to the foreign company.

H. P. Ranina is a practising lawyer, specialising in tax and exchange management laws of India.

More news from Business