The Hindu Business Line : MAIT urges excise duty cut to boost PC sales

PRICES of personal computers (PCs) could come down by Rs 3,000-5,000 and spur sales by 30-35 per cent if the Government cuts the excise duty to eight per cent from the current 16 per cent, the Manufacturers Association for Information Technology (MAIT) has said.

"A reduction of Rs 3,000-5,00 will make a big difference in a price-sensitive market like India and will really help sales grow," said Mr Vinnie Mehta, Executive Director of MAIT, making a strong case for lowering the duty.

Currently, the excise duty and local levies add up to around 30 per cent of the retail price of a PC.

Reducing the excise duty will consequentially bring down other levies as well, bringing about a significant drop in the prices of computers.

Despite its emergence as a software powerhouse, India has only nine computers per 1,000 persons, whereas China has three times that number.

Speaking to Business Line, Mr Mehta said that a lower excise duty would also help check the growth of the grey market operators who evade taxes.

"Today, assembled PCs are preferred because of the huge price difference compared to branded PCs. At a rate of eight per cent excise, the price gap will really narrow," he added.

"The margins in the PC business are only 2-4 per cent and manufacturers can afford to play with prices only in this range. As against this, the grey market operators are straightaway enjoying a 20-30 per cent leeway."

A recent study by MAIT and market research firm, IMRB, showed that the share of the unorganised sector, comprising grey market operators and local and lesser-known brands, went up to 63 per cent in the third quarter of the last financial year, from 50 per cent in the first quarter.

Total PC sales in the third quarter stood at 4.31 lakh units, lower by 2.3 per cent over the previous quarter on a sequential basis.

Total PC sales for 2002-03 is expected to be over 20 lakh units.

"We believe that that the loss to the Exchequer because of the excise duty cut can be easily offset by the growth in sales and shift from assembled PC to a branded computer" Mr Mehta said.

According to MAIT, the Government loses around Rs 500 crore because of the tax evasion by grey market PC assemblers.

`Encourage local manufacturing': Mr Mehta said that the Government should offer more incentives to encourage local electronic manufacturing since all import duties for the sector will be zero from 2005, in line with the agreement with the World Trade Organisation (WTO).

"Who will be interested in local manufacturing at that time, when you will be able to import goods at nil duty rate?"

The Government should, therefore, give a 50 per cent reduction on local taxes for products manufactured in the country and some income-tax exemptions to enthuse local manufacturers, Mr Mehta said.

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