The Manufacturers’ Association for Information Technology (MAIT) on Tuesday said it has sent a memorandum to the Ministry of Finance, to emphasise the need for growth-oriented measures to boost domestic manufacturing in the country.
The association, representing IT hardware manufacturers, has given four key recommendations for the Union Budget 2013-14 including – abolition of inverted duty structure for manufacturers of IT products; nil rate of Central Sales Tax (CST) against purchases of products manufactured in India; removal of basic customs duty on IT accessories; and enhancement of maximum retail price abatement.
“With manufacturing value addition in India abysmally low, a whopping $320-billion worth of electronics will be imported by 2020, which may exceed the annual oil import bill. Hence, in our recommendations, we have requested the Government to abolish the inverted duty structure on IT components which will help revive the demand and promote manufacturing in the country,” said Anwar Shirpurwala, Executive Director, MAIT.
Inverted duty
It said the inverted duty structure is making direct import by end-customers or trading (import and sale) of IT products advantageous in comparison to manufacturing of IT products in India.
The association has recommended that sales of information technology agreement (ITA - agreement within the WTO aiming to expand world trade in IT products) bound products manufactured in India for subsequent sale (resale) be taxed at zero per cent so that manufacturing is not placed in a disadvantageous position with trading or direct imports.
For example, if manufacturing units are located in one State, the manufactured products attract a CST at 2 per cent in inter-State sales, while traders import the goods into the State of consumption and totally avoid the CST cost, thus putting domestic manufacturing at a disadvantage.
Duties on accessories
Similarly, MAIT has said that accessories such as adapters, battery, laptop carry bags and speakers form critical parts of the main IT product, imposing custom duties on the same increases the cost in the hands of the manufacturers that affects the pricing to end-customers.
On the MRP, it has suggested that the anomaly should be corrected by increasing the abatement rate from 25 per cent to 40 per cent on IT products. Because of the prevalent rates of excise duty, sales tax in addition to transportation costs and dealer margins, it said the abatement should be increased.
“With growing telecom density, growth of Internet and IT should be easy especially with current large projects’ roll out plan by Government and the devices cost tumbling year after year,” J.V. Ramamurthy, President, MAIT, said.