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Telecom sector has not been impacted as dramatically by COVID-19 market disruption because of the newer use cases generated amongst its users. While the lockdown brought the economy to a halt, it created demand on account of people working-from-home, schools going online, home entertainment, and isolated consumers reaching out to friends and family.

The telecom operators emerged as a lifeline in keeping the world connected and contributed during the lockdown and social distancing period. Further, telecom facilitated digital transition of people and businesses at a pace much faster than it would have otherwise.

Assessing the impact from the supply side of handset and network equipment manufacturing, the global disruption in supply chain and suspension of facilities has significantly impacted this sector, however, a near-term bounce back is expected.

Telecom Infograph

Telecom Regulatory Authority of India, Imagine a new connected world, KPMG in India and India Mobile Congress report, October 2019

The global supply chain re-alignment has positioned India uniquely in the global radar. With India being the second largest global market1 for smartphones and telecommunications, the telecom ecosystem manufacturers are thinking of bringing manufacturing supply chain closer to their customers. The recent policy reforms and incentives offered by the government are likely to further accentuate these realignments.

Key growth drivers

National digital communications policy

  • Focussed on creating a robust digital communication infrastructure and roadmap for emerging technologies such as 5G, artificial intelligence, robotics, internet of things and cloud computing
  • Simplified licensing and regulatory frameworks while ensuring appropriate security

Phased manufacturing programme (PMP)

  • To promote in-depth manufacturing of domestic cellular mobile handsets
  • Establishment of a robust cellular mobile handset manufacturing eco-system

Production-linked incentives2

  • Production-linked incentives outlaid by government for five years
  • From 1 August 2020 to 31 March 2025, all companies registered in India are eligible for an incentive of four to six per cent on incremental sales of eligible goods

Promotion of manufacturing electronic components3

  • Incentive of 25 per cent of capital expenditure on reimbursement basis
  • The benefit is available for investments within five years from the date of acknowledgement of application. Scheme open for applications till 31 March 2023

Incentives for handset manufacturers

  • Modified special incentive package scheme to electronic manufacturing units at the rate of 20 per cent in SEZ and 25 per cent of capital expenditure in non-SEZ units.
  • State incentives like stamp-duty exemption, electricity-duty exemption, etc. along with concessional rate of basic customs duty on import from specified countries subject to conditions

Export incentives

  • Units can be setup within a notified SEZ. Export of goods/services by SEZ zero-rated
  • Key benefits include customs duty exemption on goods, import of services, Service Export from India Scheme (SEIS). Export of goods/services by EOU is zero-rated. Key benefits include Merchandise Export of India Scheme (MEIS), customs duty exemption on goods, etc.
  • Key compliance includes non-financial entity (NFE) requirement.

How can KPMG in India help?

Tax and compliances

  • Application and implementation
  • Planning advisory
  • Ongoing support

Business strategy

  • Supply chain strategy
  • Route to market and sales capabilities
  • Insights-led sales engine

Regulatory compliances and technology support

  • Assist in regulatory compliances and obligations
  • Technology
  • Risk management

Source:

  1. Imagine a new connected world, KPMG in India and India Mobile Congress, October 2019
  2. The Gazette of India Notice CG-DL-E-01042020-218990, 1 April 2020
  3. The Gazette of India Notice CG-DL-E-01042020-218992, 1 April 2020

Guidance note to readers: We have relied on secondary sources which are considered reliable but have not independently verified the data. KPMG shall not be liable and/ or responsible for any reliance placed on the content of the website.

Sector Lead

Partner and National Leader - Telecom

KPMG in India

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