Customs Duty On Electronics Transmission Will Impact India’s Chip Design Space: Industry Bodies

The Indian government’s proposal at the 13th ministerial conference of the World Trade Organisation (WTO) to refrain from extending a moratorium on imposing customs duties on electronic transmissions would impact the semiconductor design ecosystem in India, industry bodies told ET.

The moratorium is set to expire in February-March this year. 

Electronic transmissions refer to the online delivery of digitisable products like video games, music and data files, among others. 

The WTO member countries have maintained a consensus since 1998 to abstain from imposing customs duties on electronic transmissions. This moratorium has been consistently renewed during successive ministerial conferences, which serve as the supreme decision-making authority for the WTO’s 164-member assembly.

However, India’s stance at the ministerial conference has not been welcomed by industry bodies.

Ashok Chandak, president of India Electronics & Semiconductor Association (IESA), told ET that the industry body has submitted a representation to the Indian government to not impose customs duties on electronic transmissions. The IESA has over 300 electronic companies as its members, including 100 semiconductor companies.

“It’s a concern. All our design activities utilise data. Our member semiconductor companies have their offices in Europe, US and Japan and in other countries. The design data exchange keeps happening. How can one tax that data exchange? We have been opposing this,” he said.

Meanwhile, John Neuffer, president of Semiconductor Industry Association, told the publication, “India is very strong in semiconductor design. Just about every chip company has an office here. There’s a heavy US footprint here, mostly design and some R&D. We need to ensure seamless cross border data flows. Exposing data flows to tariffs will have a chilling effect on the semiconductor ecosystem here.” 

The development comes at a time when the Indian government has left no stone unturned to attract semiconductor companies to set up manufacturing operations in India. From a $10 Bn commitment to the India Semiconductor Mission (ISM) to the design-linked incentive scheme, the Centre has taken a number of steps to develop a semiconductor ecosystem in the country.

Chip designing is a key part of the semiconductor ecosystem. As such, any adverse impact on this space can affect the government’s plans.

Earlier this month, union electronics and IT minister Ashwini Vaishnaw said India will get its first domestically made memory chip from Gujarat by the end of the ongoing year. 

The minister made this announcement after South Korea’s Simmtech announced an investment of INR 1,250 Cr in Gujarat during the Vibrant Gujarat Global Summit 2024, Simmtech, which manufactures high-layer printed circuit boards for semiconductors, signed a Memorandum of Understanding (MoU) with the Gujarat government to set up a plant in the state to boost the semiconductor ecosystem.

A number of Indian startups are also working in the area of semiconductors and their number is expected to surge in the coming years.