Despite consumers increasing the number of durables they purchase, the penetration level is still low at 30-35 per cent, compared to many developing countries globally, where it is reported to be around 65 to 70 per cent. With a view to increase penetration level, the durables industry has spelt out its budget wish list which includes import duty reduction on components, abolishment of Special Additional Duty and changes in service tax to augment industry growth.
According to Mr Y. V. Verma, COO, LG Electronic India Ltd, “despite high input prices there is no dip in demand. Going forward, we see India becoming one of the top durables markets.”
Aimed at boosting India's manufacturing capabilities and also increasing penetration of the durables and appliances industry, Consumer Electronic Manufacturers Association (CEAMA) has sought certain measures in the forthcoming budget.
These include exempting parts of DVD Writers from customs and excise duty. “This is an incidence of inverted duty structure. We recommend that the parts of DVD Writer should also be exempt from customs duty. This will remove the duty disparity and non-viability in manufacturing,” CEAMA spokesperson said.
SAD abolishment
Apart from this, the industry has also been demanding abolishment of special additional duty (SAD) on imports.
“Manufacturers who are selling items after importing them have to submit a refund application complying with all rules specified for claiming refund which is cumbersome and lengthy and takes a year. SAD is exempted on goods which are imported for retail sale. And for manufacturers, Cenvat credit is available,” CEAMA said, adding that SAD should be abolished as it is not generating any revenue for the Government and it will also reduce transaction cost for manufacturers.
Mr Pranay Dhabhai, Managing Director, Akai India, notes that, “the industry has been demanding reduction in import duty from the current 10 per cent to a logical 7.5 per cent. LCD is a segment which is the fastest growing. But much most of the panels are imported. If the import duty is reduced, it will snowball into larger benefit for the industry and consumers”.
The durables industry has also been demanding changes in service tax.
“Abatement is not available on Management of Repair & Maintenance Services for use of parts / components for composite contract in case of Repair & Management Service. Consequently, Service Tax is charged on the whole contract value which includes both parts and labour. Based on historical evidence, 30 per cent of a typical annual maintenance contract (AMC) is attributable to material and the balance 70 per cent to labour. Therefore, the industry recommends that service tax should be collected on 70 per cent of the AMC Value, and applicable VAT should be charged on the balance 30 per cent,” an industry players said.
Set Top Boxes
At present, of the 10 Million Set Top Box (STB) market, about 80 per cent is being met through imports.
Domestic manufacturing units such as Videocon, Dixon and Kortek have come up in the country supplying about 2.40 million STBs per annum.
“We recommend that the Customs Duty on Set Top Box should be increased from the current 5 per cent to 10 per cent. This will give a boost to domestic manufacturing which has been struggling against cheap imports,” a slew of manufacturers said.