Any entity or company planning to bring laptops and computers for sale in India will now have to seek permission or license from the government for their inbound shipments. The notification in this regard was issued by the Directorate General of Foreign Trade (DGFT).

What is HSN Code 8471?

The Harmonised System of Nomenclature (HSN) code is a classification system used to identify products for taxation purposes. Data processing machines such as laptops are classified under HSN code 8471.

Why have these restrictions been imposed?

The move has been announced with an aim to promote domestic manufacturing of these products under the recently renewed production-linked incentive (PLI) scheme for IT hardware.

The last date to apply for the so-called production-linked incentives in this product category is August 30. According to a PTI report, it also curtails inbound shipments of these goods from countries like China and Korea.

However, it quoted a government official as saying that there are a variety of reasons for imposing these restrictions but the primary reason is ‘to ensure that the security of our citizens is fully safeguarded.’

Exemptions?

Under the transition provisions of the foreign trade policy (FTP), if the bill of lading and letter of credit has been issued or opened before August 3, the import consignments can be imported.

An importer can apply for a license from August 4. The trader should have to be a regular importer to get a license.

Exemptions have also been given import of one laptop, tablet, all-in-one personal computer or ultra-small form factor computer, including those purchased from e-commerce portals through post or courier.

However, these imports shall be subject to payment of duty as applicable.

According to PTI, there is an exemption from seeking import licensing for up to 20 items per consignment for R&D, testing, benchmarking and evaluation, repair and return, and product development purposes.

Impact

The announcement is expected to impact companies that import bulk of their products.

Tech giants like Apple, Samsung, Lenovo etc. will have to either start manufacturing their laptops in India or stop imports.

Most of the laptops and personal computers sold in India are manufactured or assembled in China. With the new rule, the government plans to shift all this to India.

If that happens, the prices of these gadgets can go down.

The companies, meanwhile, can apply for and obtain special permits to bring laptops into India.

Could this be a good move?

India started hiking tariffs well before protectionism in the West took over in the wake of the pandemic.

The Rajaraman Committee report set the stage for the import of computers and their parts, the subsequent computerisation of the Indian Railways passenger reservation system, and the progressive entry of computers into India’s financial sector, eventually catalysing India’s IT revolution.

The Centre’s sudden move marks the reversal of the broadly consistent policy followed by successive governments since the Rajaraman Committee.

There needs to be an emphasis on finding a balanced approach between protectionism and trade liberalization for sustainable economic growth.

The sudden shift in trade policy, including the use of licensing as a trade tool could prove disruptive, even regressive trade policy.

There is a need for thoughtful policy decisions that consider the potential impact on industries, consumers, and international trade commitments.