The Hardware Industry Associations' Budget Wish List
The Consumer Electronics and Television Manufacturers Association, Electronic Component Industries Association, Manufacturers Association of Information Technology and Telecom Equipment Manufacturers Association- the four apex hardware associations have formed a Joint Council to give consolidated recommendations for the forthcoming Union Budget 2002-03.
According to the council, the hardware industry (Electronics/IT/Telecom) in India is faced with the challenge of zero duty regime as per India's commitment to the IT Agreement of the WTO. The IT Agreement pertains to only 217 electronic components and finished goods, but capital goods and certain non-electronic raw materials do not fall within its purview.
While the IT/Electronics Industry is in favour of a free and fair trade regime, the IT Agreement would impact the industry adversely should there be zero duty on the finished goods (end-products), while input raw materials, components including dual usage items and capital goods continue to attract import duty (25-35 per cent). Apart from a host of other disability factors, the very large turnaround time for exports and imports due to procedural delays and high cost of capital also adversely impact the business as the rate of obsolescence in the sector is very high.
The industry recommends the government to take a holistic view of the entire situation. For the hardware manufacturing industry to remain competitive, the government needs to adopt the following measures:
Implementation of the IT Agreement in 2005 as per India's commitment to the WTO: The industry will not be able to survive should the implementation be brought forward to 2003 as announced earlier by the government. Further to rectify the inverted tariff structure, it is recommended that there be,
- Nil customs duty on all capital goods for IT/Electronics/Telecom manufacturing
- Nil customs duty on all raw material inputs including dual usage items
- Three tier customs duty structure for Electronics/IT/Telecom manufacturing
Special scheme for the hardware sector: For the purpose of ease of implementation of Nil customs duty on capital goods and input raw materials including dual usage items, a special Domestic Tariff Area scheme should be announced for the hardware sector (IT/Electronics/Telecom) as list based exemption may prove to be tedious. It is recommended that the scheme have the following provisions,
- NIL customs duty on all capital goods
- NIL customs duty on all input raw materials/components including dual usage items
- Sales in the DTA on payment of all existing duties
- No Net Foreign Exchange Positive/Export Performance condition
- NIL corporate tax for 10 years
- All existing units should be allowed to freely convert to the new scheme
- Ministry of Communication and Information Technology to be the nodal agency for implementation of the scheme
As an alternative, the government may consider modification of the Electronic Hardware Technology Park scheme on lines of the recommended salient features for the special scheme or extend deemed export status to all supplies including capital goods and raw materials to the hardware sector.
Excise Duty:
- CENVATable (Central Value Added Tax) concessional 8 per cent excise duty on all IT/Electronics/Telecom products especially for indigenous products of mass consumption and also on low value electronics products of mass consumption e.g. low cost PC, B&W Television, Transistor-Radio etc.
- Abatement on MRP for CTV should be increased to 40 per cent from 35 per cent. Abatement on MRP at 40 per cent should be introduced for PCs.
Simplification of procedures for exports and imports: In order to bring the turnaround time from the existing 7-10 days to internationally accepted standards of less than a day, the government needs to,
- Introduce self-declaration clearance based on the excise model
- No physical controls
- All conciliation of data/duties to be post clearance
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