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Indirect Tax Alert: Production Linked Incentive (PLI) Scheme to Promote Telecom and Networking Products Manufacturing in India

26 February 2021

The Department of Telecommunications (DoT) under the Ministry of Communications has proposed to introduce a PLI scheme to provide a financial incentive to boost domestic manufacturing and attract investments in the telecom and networking product segment to encourage ‘Make in India’ of these products, with effect from 1 April 2021.

The proposed incentive will be available to domestic manufacturers of various telecommunications products, such as Core Transmission Equipment, 4G/5G, Next Generation Radio Access Network and Wireless Equipment, Access & Customer Premises Equipment (CPE), Internet Of Things (IOT) Access Devices And Other Wireless Equipment, Enterprise equipment: Switches, Routers or any other products, as decided by the Empowered Group of Secretaries (EGoS).

The eligibility of benefit would be subject to achievement of a minimum threshold of cumulative incremental investment over a period of four years and incremental sales of manufactured goods net of taxes (as distinct from traded goods) over the base year, which will be FY 2019-20. Incentive for each applicant will be capped based on total investment committed at the time of application, which will be informed to the applicant at approval stage. There will be a minimum investment threshold of INR 100mn for MSME and INR 1bn for other larger sectors. Land and building cost will not be counted as investment.

It has also been proposed that the total number of beneficiaries will be limited, owing to the fixed ceiling of the budgetary outlay of INR 121.95bn. over a period of 5 years. The beneficiaries will be decided through a transparent mechanism, to be finalised by the Competent Authority as per the Scheme Guidelines, wherein they will have to meet the minimum incremental net sales criteria over the base year.

The applicable incentive percentage for MSMEs will be 7% for Year 1 & 2, 6% for Year 3, 5% for Year 4 and 4% for year 5 on eligible sales over the base year. For category other than MSME, the applicable incentive percentage will be 6% for Year 1 & 2, 5% for Year 3 & 4 and 4% for year 5 on eligible sales over the base year.

The Scheme will also include contract manufacturers as defined in the FDI Policy Circular of 2017

[Department of Telecommunications -notification No. F. No. 13-01/2020-IC dated 24 February 2021