Darkness & Ray of Hope for Indian Mobile Phone & Other Industries during COVID-19

Bhupesh Raseen

Coronavirus (COVID-19) impact may set India’s mobile phones & other products production back by four years. Spread of this pandemic is the biggest threat to the global economy. Government need to ensure Ease of Doing Business, Support for Cash Flow Management and Trade Facilitation for industry. After corona fiasco, many companies making in China will move to India and therefore loads of progress in the areas of Policy, FDI & Infra required.

Chairman-Mobile Advisory Committee, TMA
Board Member-Ghana India Trade Advisory Chamber (GITAC)

Coronavirus (COVID-19) spread is the biggest threat to the global economy. The coronavirus outbreak, which originated in China, has infected people globally. Several countries and their cities are put into lockdown, placing quarantine measures on the entire population. This has confined citizens to their homes unless they have to buy food, medicine, or seek any medical treatment. The COVID-19 pandemic has effectively brought normal life to a halt in India.

Companies have rolled out mandatory work-from-home policies amid the spread of COVID-19. People are advised to avoid social gatherings and traveling to different countries/cities to avoid further spread of the disease. Malls, shopping centres are temporarily shut down in effect to COVID-19. These limitations are leading to business slowdown in most of the industries and struggling with the situation.

The Tourism, Hospitality, Aviation, Entertainment, Tech, Retail & eCommerce, EV and Mobile Phone industries are severely affected by the coronavirus outbreak. As the consumption of many products or services goes down, it leads to an impact on the workforce. In the current scenario, the jobs of the employees are at a huge risk.

Mobile Phone Industry is facing heat and has a very bad impact of outbreak. India’s share in global smartphone production is set to fall to the levels seen four years back, as factories have halted manufacturing activities due to the lockdown and demand is likely to stay weak till June-July. India has more of an assembly-line scenario than manufacturing. Majorly mobile phone display components and semi-knocked down (SKD) kits are imported from China. Only around 10 per cent of the components are indigenous. Things can become unfavourable for the mobile phone ecosystem in India if the current situation persists.

The transportation of various components & various components for making a mobile phone, machine, a robot is badly hit and there is no certainty till what time this might happen. There is a supply chain interruption with China & across nations. The most important resource required to build any technologically advanced product, human beings, are scared to even step out of their comfort. Technology, being a constant evolution with people working day and night to bring something that will change the world, is badly hit because of COVID-19.

The outbreak has presented new roadblocks for the Indian economy now, causing disruptive impact on Indian Industries. With such a crisis in the country, the industries have gone on a backfoot. There is an urgent need to take instant steps to address the key pain areas of the industry. Government need to ensure Ease of Doing Business, Support for Cash Flow Management and Trade Facilitation for the industry which may be addressed as per the following suggestions:

Ease of Doing Business and Regulatory Issues
Due date for filing appeals with for matters under litigation should be extended by up to 60 days post lifting of lockdown order and resumption of operations. Delay in filing appeals against an Order beyond statutory timelines should be automatically condoned.

Automatic renewal of pollution control approvals for 1 year. It is important for the government to work out all logistics for the return of labour in the post lockdown scenario beforehand. Government should engage the trade unions and through them reach out to the workers and encourage them to join back for production.

The Government should clarify that from April 1, 2020, the industry, which is declared under essential goods, the wages should be paid to only the workers who work during the lockdown period, while others be considered being on leave.

Support To Cash Flow Management
Government should make sure that airline tickets to be refunded as done by railways or extension to be permitted within 6 months.

Traders who are sending commodities to their customers in other cities and clients, are unable to transfer cash money as banks are not allowing transfer of money beyond a limit. (banks are allowing transfer of only upto Rs. 25,000 which is insufficient for a buyer at this crisis time). So, the buyers are unable to purchase due to non-availability of adequate transfer of money.

Most companies are stressed. Though RBI has provided a relief on interest rate cycle, a law amendment is required to stop the clock on every possible payment to government and financial institutions as everyone will need at least 3 months-time to get back on track post lockdown opens up.

As 10% extra limit on cash credit is discretionary on banks, best would be reduce margin on working capital loan from 25% to 10%. Urgent release of huge receivables from CGHS/ECHS/ESI and State Govt schemes is needed to improve health services.

Trade Facilitation
There are some items which are imported without payment of customs duty on submission of bond with the Customs Authorities. Due to sudden announcement of lock down and suspension of operations, submission of bonds by the importer to Customs might get delayed. Government should allow clearance of such consignments on provision basis to be regularized by submission of bond subsequently. Similarly, bond limit available with Customs Authorities of one port should be allowed to be utilised for import of consignment at some other port as the importers are facing difficulties in submission of fresh bonds due to lock down.

In view of suspension of operations due to current lock down, organisations are unable to send the export documents for the consignments exported over the past few days. Non-receipt of such documents will lead to payment of demurrage by the importer. Hence, Government should allow operation of some courier companies to deal with exigencies.

While EXIM policy has been extended, there is a need for clarity on whether this would also mean that MEIS has been extended.

With immediate effect and till the end of the Lockdown, Customs & Excise should allow submission of scanned and attested copies of document, instead of originals (which may be submitted later within a specified timeframe). Easing of operations at ports is needed for faster turnaround and clearance of cargo.

Tax Issues
Government should provide relief to taxpayers in view of the severe liquidity problems being faced by them, as also incentivize contributions towards combating COVID19.

Industry requires short term, temporary relief from payment of taxes to address severe liquidity issues faced by businesses and deferment of all tax payments until 30 June 2020. Government should expedite refunds and allow deduction for contribution made or expenditure incurred towards combating COVID 19 in India.

The limitation on interest deduction should not be applicable for debts raised or guaranteed by Non-Resident (NR) Associated Enterprise (AE) during April 2020 to March 2021. This would result in ease of liquidity in this time of need and help taxpayers to use the amount released for business purposes.

In view of the severe liquidity crunch faced by the taxpayers, it is suggested that all GST payments should be allowed to be deferred by six months upto 30 September 2020.

Exemption from levy of custom duty and IGST on import of goods such as Ventilators, testing kits, masks, sanitizers, medicines and other equipment’s which are essential in prevention or cure of COVID 19.

As per Rule 85 of the CGST Rule, 2017, the amount payable on reverse charge basis under the Act shall be paid by debiting electronic cash ledger maintained as per rule 87 of the CGST Rules, 2017. Thus, the person making payment of GST liability cannot utilize input tax credit balance to pay the said liability. This provision is causing hardship to all taxpayers particularly at such difficult time when the world is facing liquidity shortage due to economic recession and COVID-19 pandemic. For a period of six months, relaxation may be provided to utilize input tax credit balance to pay the RCM liability through necessary amendment in GST rules.

To support the industry, government need to extend Waiver or relaxation in interest payment, Facilitate quick disposal of refund claim, Relaxation of restriction to claim ITC under Rule 36(4) of the CGST Rules, 2017, Relaxation in Rules to offset GST credit balance, Relaxation in the provision mandating reversal of input tax credit on account of nonpayment to the supplier within 180 days or time frame extended to a year, Relaxation in levy of tax on supply of essential goods to hospital/government or other medical facilities, Extend time limit for filing of GST Annual Return in form GSTR-9 and Reconciliation statement in form GSTR-9C, Immediate issue of SEIS licenses to Exporters by Ministry of Commerce, Deferment of payment of GST liability, Relief to e-commerce operators and Extension of validity of expired e Ways Bills for a minimum period of three months.

Indian government is monitoring the prevailing situation. On the other hand, Indian industry is expecting quick action & policy intervention which can help in minimising the impact of the outbreak on the Indian economy and industries.

As soon as COVID-19 is over, India needs to quickly make loads of progress in the areas of Policy, FDI & Infra. India is going to be the best investment place in the world and likely to get huge investments from US & Europe. Many companies making in China will move to India after corona fiasco. India will emerge as “Manufacturing Hub for the world”. If India is well prepared, therein can start the Golden era of Indian economy.