India is set to back a call for duties on cross-border digital e-commerce and data transfers, at an upcoming global trade meeting – a move that has spooked global chip giants.
The Narendra Modi-led Indian government has said that physical goods like books and videos, once governed by traditional tariff rules, were now available as digital services and should be subject to duties.
Developing nations are facing a massive loss in potential revenue with such imports from developed countries on the rise, India maintains.
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But a global consortium of semiconductor industry groups has warned India that its stance will stifle its own chip design industry.
Duties on data transfers would “also impede India’s efforts to advance its semiconductor industry and attract semiconductor investment,” the World Semiconductor Council (WSC) wrote to Indian Prime Minister Narendra Modi on Thursday.
The WSC comprises of chip industry associations in regions like the US and China, which represent chip stalwarts such as Qualcomm, Intel, AMD and Nvidia.
‘Risk of worsening chip shortage’
The group’s warning comes ahead of a World Trade Organization (WTO) meeting in Abu Dhabi early next that will see discussions on several trade-related issues.
Issues on the agenda include a moratorium in place since 1998 on applying duties on electronic transmissions.
While the US and Europe are pushing to extend the moratorium, developing nations like India, South Africa and Indonesia are opposing any extension.
If no agreement is made, the moratorium would expire this year.
The moratorium collapse would mean tariffs on digital e-commerce and an innumerable number of transfers of chip design data across countries, raising costs and worsening chip shortages, the WSC said in its letter.
The chips sector is a key plank of Modi’s agenda to push India’s economic growth, with a $10 billion incentive package in place to boost the industry.
The WSC also pointed out that “more than 20% of the world’s semiconductor design workforce is based in India.”
In the letter, the WSC also urged India to work toward a WTO agreement to permanently prohibit countries from subjecting cross-border data and digital tools to customs duties and procedures.
India’s support to renewing the moratorium will “send a strong signal to semiconductor companies that India is an investment friendly environment,” the group wrote.
- Reuters, with additional editing by Vishakha Saxena
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