Calcutta, July 5: Mait is optimistic that the country will become a major manufacturing hub for mobile handsets in three years.

“With European major Elcoteq Network Corporation deciding to set up a manufacturing unit in the country, the prospects have certainly brightened up,” Mait executive director Vinnie Mehta said.

Elcoteq manufactures equipment and handsets for Nokia and Sony Ericsson. LG and Motorola are also considering setting up units. The handset industry, estimated at Rs 6,500 crore, is expected to grow to Rs 15,000 crore by the year-end.

According to global analyst EMC, India, currently ranked 13 in the world, will become the third-largest market for the mobile industry by December with around 117 million subscribers.

The Indian Cellular Association (ICA) is in the process of finalising a consultant to prepare a position paper on manufacturing.

ICA president Pankaj Mohindroo said, “The position paper will evaluate the prospects and competitive advantage of manufacturing handsets, components and accessories for both GSM and CDMA in the country.”

The apex body is also recommending a stable and composite tax structure below 10 per cent for handsets.

The composite indirect tax, including customs or manufacturing duty, and VAT should be under 10 per cent, said Mohindroo. “VAT should be implemented at the floor rate of 4 per cent across the country. Central sales tax and octroi should be abolished,” he added.

The present composite duty structure stands at 14.4 per cent, with basic customs duty at 5 per cent. Counterveiling duty (CVD), excise and special additional duty (SAD) are at zero per cent.

“The high customs duty on spares, components, parts and accessories of mobile cellular handsets, coupled with an 8 per cent service tax, have created a huge grey market in this segment. Our estimate is that the grey market is over 95 per cent,” he said.

“We recommend a 16 per cent CVD and no customs or SAD on components,” he added.