| Date: |
11-07-2014 |
| Subject: |
India Taxes Electronics in Bid to Reduce Imports |
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NEW DELHI—India will start charging taxes on some imported telecommunications products as it aims to cut imports of electronic goods, a move aimed at narrowing the trade deficit and spurring local manufacturing.
"The demand for electronics is growing very fast," Finance Minister Arun Jaitley said on Thursday while presenting the new government's budget to Parliament.
Electronics is the third-largest component of India's import bill. Such imports are increasing every month, adding to India's trade-deficit woes. India's government last year cut the import bill for gold by imposing duties; its largest import bill is for oil.
New Delhi estimates imports of electronics will surge to $400 billion in 2020 from about $45 billion now, surpassing the amount of money the country spends on imported oil.
During the last fiscal year, which ended March 31, Asia's third-largest economy managed to narrow its trade deficit to $32.4 billion, or 1.7% of gross domestic product, from $88.2 billion, or 4.7% of GDP, a year earlier, partially because of its restrictions on gold imports.
According to the new tax structure, New Delhi plans to start charging 10% on some telecommunications products that aren't covered by the Information Technology Agreement, a global pact on trade in electronics. The government will also seek to introduce a new education levy on other imported electronic products, Mr. Jaitley said.
New Delhi will also remove taxes on components used in personal computers, as well as in LCD and LED television panels which are below 19 inches in screen size, he said.
The tweaking of taxes will remove an irritant for Indian manufacturers that rely on these imported components, said Ashok Chandak, chairman of India Electronics and Semiconductor Association, a trade lobby.
Changing the tax structure will help make locally produced electronics more "competitive against the finished imported goods and will help to create an ecosystem of components in India," Mr. Chandak said.
Source : online.wsj.com
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