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The Finance Ministry has opposed a proposal from the IT Ministry to levy a cess on electronic products. The Department of Economic Affairs has taken the view that since all cesses are to be removed and subsumed in the Goods and Services Tax, it is not desirable to introduce a new levy now. The Department of Information Technology and Electronics (DEITy) had proposed the cess in order to fund projects under the Electronics Manufacturing Policy.
The Department of Agriculture has also raised concerns against the levy on grounds that it will increase the price of electronic products, which, in turn, will increase the cost of implementation of e-governance projects.
The proposal to introduce the cess was earlier discussed in the Cabinet but a decision could not be taken due to difference of opinion. The Cabinet instructed the Committee of Secretaries to take a view on the issue before bringing it back to the Cabinet for approval. The Cabinet had approved the National Policy on Electronics and Modified Special Incentive Package Scheme for electronic goods manufacturing last month without mentioning the cess.
Under the policy, various packages are being envisaged, including reimbursement of indirect taxes and a subsidy of 20 per cent on capital expenditure made by high-tech manufacturers in special economic zone (SEZ) units. Investments made in non-SEZ units could get a subsidy of 25 per cent. The Government also plans to help set up two semiconductor fabrication units in the country. All of this would cost the exchequer about $32 billion by 2020.
In order to raise the initial corpus for the project, the IT Department had proposed to levy the cess on electronic products sold in the country. The revenue earned from the cess was to be put into the National Electronics Mission fund. DeitY has argued that the Government will end up being net revenue earner by 2020. According to DEITy, if production reaches Rs 22 lakh crore by 2020, then the Government subsidy will amount to Rs 1,80,675 crore while the revenue accruals will be Rs 3,21,860 crore.
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