Maharashtra offers to offset Foxconn’s import duty burden

Feb 16, 2017

In what looks like a last-ditch attempt to get manufacturing giant Foxconn to invest in Maharashtra, the state government has offered to compensate the Taiwanese company the 11.5 % import duty levied by the Centre.

State government officials met senior officials of Foxconn on Tuesday and have given a proposal that it could compensate the import duty imposed by the Centre either by giving a grant or a subsidy to offset the losses suffered by the company if it is charged the import duty.

Those in the know said that the state was forced to give this assurance as Foxconn was reluctant to fund the setting up of a manufacturing facility in Maharashtra, or for that matter, anywhere in India unless the government charged import duties that were cheaper than the duties in China.

Foxconn was keeping a close eye on the inter-ministerial panel formed by the central government after American technology company Apple, which also wants to manufacture in India, asked for similar duty exemptions and tax concessions to manufacture their products in India.

Sources in the Maharashtra government said that if the inter-ministerial group heeded to Apple’s concerns and waived off the duty and offered tax exemptions, then even Foxconn would have benefitted. But since nothing much has happened on the front, the Maharashtra government has taken the initiative by offering to compensate Foxconn for the 11.5% import duty levied on it.

However, there are questions as to whether Maharashtra can give such concessions under GST. “From a manufacturing point of view, the revenue generated can be incentivised to state GST, but only for the products consumed within the state. If they think that manufacturing activity is generating employment opportunity and other benefits to the state, they can offer other incentives, but for that they will have to dip into their own pockets," said Bipin Sapra, an indirect tax expert at consulting firm EY.

A year back, Maharashtra Chief Minister Devendra Fadnavis managed to get the Taiwan firm to commit an investment of $5 billion in the state.

Source: Economic Times