A case of misclassification

Pankaj Mohindroo
President, Indian Cellular Association

IT was never 34%. It was just a
misclassification issue which erupted
in one of the accounts. So there was
never any question in our minds that it
was not 4%. And we have a very good
infrastructure and political leadership in
the UPA government. They were very
responsive and we were quickly able to
get the clarification across to everybody.

The fear was that if this misclassification or this confusion had erupted, what would have happened was that obviously the consumer cannot take a 34% price increase so it would have become a grey market unit and the product would have
started coming in from the grey market.

Such development will help the LBS industry. There are three aspects of LBS in my mind. One is essential location finding, which is security related to our parents and children. Like I am worried about my child so I would always like to know where my child is. And the mobile industry has manylive solutions for that. The second is corporate and business related location based services. The third is mobile marketing location based services which will give the real lease of activity to this industry. There you will be able to hunt for things which you need and you get special offers on that. So you’re attracted to hunt for them. So I think LBS marketing will be the biggest thing.

CELLULAR services are expected to benefit immensely from the reduction in Custom Duty on GPS enabled phones. With this reduction, the prices of these high end mobile handsets are expected to drop sharply. This would give a boost to the sale of these handsets, especially for the business travelers, tourists and people who are just tired of their poor sense of direction.

The increased sale of such handsets would also benefit the Service Providers as now the number of users for the GPS
service would increase, which would also enable service providers to offer these location based services at more
affordable rates and hence benefit the endcustomer by way of reduction in tariffs.

THE recent circular by Central Board of Excise and Customs, Government of India (Circular No. 17/2007-Cus F. No. 528/26/2005 – Cus (TU) classified high technology featured mobile phone having GPS as a secondary feature as a mobile phone. This circular is welcome news at a time when the Indian market for location based services is growing dramatically. Unfortunately, the order failed to deliver to the masses.

By this order, the government unintentionally created a dual stature in the market for GPS. While integration of GPS in mobile phones (cellular to be precise) will be accorded the same stature as a mobile phone, GPS use in other products will still be classified as radio navigational aid apparatus.

In so doing, the government gave relief to the privileged – those that could afford to purchase a mobile phone costing more that 20,000 Rupees. At the same time the overnment kept much needed products in the census, safety, security, and even pure navigational category at the high rate of duty (34%) – out of reach of average users.

We as an industry need to advise the government to the tremendous advantage usage of GPS brings into the lives of its citizens. From responding to an emergency to managing the nation (homeland security) GPS usage is on the rise, from Telematicsto road tolling the applications are numerous. All these devices have been kept outside of the new circular and will continue to be classified as Radio Navigational Aid Device.

GPS has come a long way. More GPS chipsets are sold into consumer and automotive applications in a year than the total produced till date for radio navigation.

In the last few years, Government of India has taken concrete steps in making GPS accessible to the masses. It first declassified GPS from other radio navigational devices making the import of GPS receivers simple. It has now
followed by reducing the duty tariffs on GPS receivers in mobile phone. It will be prudent for the Government to weigh the tremendous economic growth impetus use of GPS can have in the government and enterprise sector
and reduce the duty from 34% to 4% across the board for GPS receivers.