Semiconductor Makers Seek Duty Rollback On Components.

IT and electronics manufacturers have asked Finance Minister Pranab Mukherjee to roll back additional duty imposed on components and also make special additional duty on importers non-refundable.

Three associations representing electronics products and IT hardware have said that the budget favours foreign manufacturers over indigenous players.

Earlier, the industry had praised the budget proposal to increase funds for education, national knowledge network and use of the IT for government projects as promoting the growth of business opportunities for IT sector.

However, a detailed study of the budget made them change their stand.

"There are certain proposals in the budget that strongly discourage local manufacturing of computers and laptops, and further enhances the inverted duty structure that favours imports against domestic manufacturing," said Ashwini Kumar, President, MAIT.

Government procures products through tender process from a vendor offering lowest price. The increase in taxes for components used in local manufacturing will lead indigenous players to struggle for getting business from government.

Details worked out by Manufacturers Association for Information Technology (MAIT) show a made-in-India computer at benchmark price of Rs 25,000 will cost at least Rs 375 more than an imported unit with same features.

This year Union Budget has imposed 5% excise duty  on microprocessors for computer (other than motherboards), hard disc drive and other vital components meant for fitting inside a PC or laptop. These units were earlier fully exempt from excise duty.

Most computer components attract a countervailing duty (CVD) of 10.3% and a special addition duty (SAD) of 4% leading to an effective duty of 14.73% as against 10.3% on imported finished goods.

Provision refunding special additional duty (SAD) imposed on imported products made the situation worse.

"SAD was originally meant to support manufacturing by compensating it for local taxes which are not levied on imports. With refund of SAD allowed to importers, this tax has lost its purpose and is in fact counter productive," Rajoo Goel, secretary general, Elcina, said.

In its initial reaction Indian Semiconductor Association (ISA) welcomed announcement made in the budget but after a thorough study it found budget discouraging for domestic manufacturing.

"The levy of duties such as 5% CVD on the wafers, which were hitherto exempt from such duties, will add to the cost of manufacturing for the solar manufacturers located in DTA (Domestic Tariff Area)," said ISA spokesperson.

Source : smartinvestor.in