‘Final WTO order on IT tariffs could take 5 years’

The WTO’s dispute settlement panell found tariffs imposed by India on mobile phones and electronic components in violation of the General Agreement on Tariffs and Trade.

India has declined the EU’s offer to resolve the issue using multi-party interim appeal arbitration, an alternative to the dispute settlement mechanism and is working on its appeal which will be filed in the next 50 days.

“European Union says it is not in good faith to take it to the tribunal but WTO’s appellate body is the final dispute settlemmet body and India will move to the top body for resolution. There should be no apprehension for the next five years. The WTO’s appellate body is not functioning. And even if that jam is resolved, it will take several years to elect members and resolve the current dispute. So there cannot be any impact on the Production Linked Incentive scheme,” the government official said. Notably, the PLI scheme is operational between 2021-22 to 2025-26.

Experts also said that a setback at the appellate tribunal would only mean that India would be forced to remove the protection by reducing duty and it will not affect the incentives offered by the government under the PLI scheme.

“In a scenario of India losing this dispute, we would only owe compensation. But in this case too, the amount is less than what we have claimed from the US and EU on other disputes,” the official added.

The official further said that WTO’s panel’s report will not have any immediate impact on India’s ICT products as EU’s share of total imports of said ICT products into India during the calendar year 2022 was at 3.03%, estimated at $550 million, while Japan’s and Chinese Taipei’s are at 0.33%, estimated at $24 million and 2.86%, estimated at $235 million respectively.

Moreover, India has brought its duty rates to 0% with respect to two of the contested products, namely, headphones/earphones and electric convertors since February 2022.

It was alleged by the complainants that India has applied duty on imports of the certain ICT products of up to 20% which is in excess of its bound rate of 0% as set forth in its Schedule of Concessions.

The contested products include mobile phones, mobile phone components and accessories, line telephone handsets, base stations, static converters, electric conductors and cables.

“India has argued that its measure of levying duty against the abovementioned products is legally valid as these products do not fall under the ambit of Information Technology Agreement -1 (ITA-1) to which India is a signatory. Thus, flowing from the commitments under ITA-1, India has accordingly amended its Schedule of Concessions submitted to WTO,” the official stated.