A consortium of semiconductor industry groups has issued a plea to government, urging it reconsider its proposal to advocate for duties on cross-border digital e-commerce and data transfers at the upcoming World Trade Organisation (WTO) meeting.

The semiconductor consortium has raised concerns that India's stance could potentially hinder its own chip design industry.

Ministers from various countries are scheduled to convene for a WTO meeting in Abu Dhabi next week to address several trade-related issues, including the extension of a moratorium on applying duties on electronic transmissions that has been in place since 1998.

Developing nations such as India, South Africa, and Indonesia are expected to challenge efforts by the US and Europe to extend the moratorium. If no consensus is reached, the moratorium could expire this year, leading to tariffs on digital e-commerce and numerous transfers of chip design data across borders. The collapse of the moratorium could escalate costs and exacerbate chip shortages, according to the World Semiconductor Council (WSC).

In a letter addressed to Prime Minister Narendra Modi, the WSC stressed on the critical role of the chip sector in India's economic growth agenda, highlighting a $10 billion incentive package aimed at bolstering the industry. The imposition of duties on data transfers could impede India's semiconductor industry advancement and deter semiconductor investment, particularly considering that over 20 per cent of the world's semiconductor design workforce is based in India.

The Prime Minister's office has yet to respond to the letter, which was reviewed by Reuters. The WSC, which comprises chip industry associations from regions such as the US and China, represents major chip players including Qualcomm, Intel, AMD, and Nvidia.

Government has argued that traditional tariff rules governing physical goods should also apply to digital services such as books and videos, resulting in the need for duties. Government asserts that developing nations face significant revenue losses due to increased imports of such digital services from developed countries.

In addition to urging India to renew the moratorium, the WSC called on government to work towards a WTO agreement that would permanently prohibit countries from imposing customs duties and procedures on cross-border data and digital tools.

Supporting the renewal of the moratorium, the WSC believes, would signal to semiconductor companies that India is a favourable environment for investment.

(With Reuters inputs)