DoT plans to update trade codes for telco gear for better tracking

Trai wants HSN codes updated to better identify products & trade

The Department of Telecommunications (DoT) is working on updating the classification of traded telecom equipment to better track its trade. This will enable higher domestic manufacturing, and plugging leakages in Customs duty collections, officials said.

This follows recommendations by the Telecom Regulatory Authority of India (Trai) to update the codes, and better capture data on the wide range of telecom equipment imported to, and exported from India.

The globally standardised Harmonised Commodity Description and Coding System, better known as (HSN) tariff nomenclature, is used by governments to classify traded goods. HSN codes are given to every traded product.

The DoT has launched an exercise with the commerce department and the Directorate General of Foreign Trade (DGFT) for updating the codes, officials said.

 

“This aims to better categorise traded telecom equipment to identify trade patterns, and allow the government to create better tailored policies for networking and telecom equipment manufacturing (Natem),” an official said.

It will also help simplify and expand the telecom products covered by the two production-linked incentives (PLIs) in the sector, he added.

While the PLI for large scale mobile and component manufacturing is administered by the Ministry of Electronics and Information Technology, DoT oversees the PLI scheme for telecom and networking products.

Trai has said that DoT should take up the need for adopting 12-digit HS Code across all sectors, with the Commerce department and DGFT. India has remained at the eight-digit level, resulting in lack of product information.

Major exporting nations have graduated to even more detailed higher levels of trade classification. Turkey uses a 12-digit HSN code system, most major developed economies such as the European Union, the United States, South Korea, Canada, and China have standardised 10-digit codes.

Confusion over codes

DoT maintains a statistical list of 52 HSN codes. In 2022-23, six modifications were made by the department to clearly classify items. They include aerials and aerial reflectors, populated, loaded or stuffed printed circuit boards, telephone answering machines and transcribing machines.

“The same will be done again soon, since Trai wants regular monitoring and periodic updates,” another official said.

In its recommendations on Natem in September 2023, Trai had also suggested creating a centralised portal for filing online grievances against misdeclaration of HSN code for the trade community, and an inter-ministerial committee to update the codes.

Meanwhile, the Telecom Export Promotion Council (TEPC) listed 48 HSN codes for telecom equipment, from modems, adaptors, routers and walkie-talkie sets to large, high-tech exports such as VSAT terminals. However, this does not include smartphones.

Lagging behind

For years, India has tried to upgrade its trade classification. Commerce department data also shows that 379 HSN codes are classified simply as 'Other'. The number of items not clearly mentioned is far higher.

This has led to lacunae in policymaking, whereby the government does not have a clear idea where the items are coming from.

Case in point, the two largest import categories within TEPC's list of HSN Codes, 85177990 and 85176290, are categorised as 'Other', trade statistics from the commerce department data shows. This is despite imports worth $9.5 billion, and $3.87 billion respectively, being registered in these codes for FY24.

In the telecom sector, the lack of clear classification has led to importers registering goods under certain HS codes to escape paying higher customs duties, officials pointed out.