Indian IT Hardware Industries Needs Differential Duty Structure

In order to encourage domestic manufacturing of personal computers, industry body MAIT (Manufacturers’ Association for Information Technology) has sought the extension of mobile phone-like differential duty structure, on IT hardware.

“We have requested the Centre to extend differential duty structure for IT hardware, specifically laptops, desktops, wired and wireless customer premises equipment (CPE), and e-Readers to be at par with smartphones and tablets,” MAIT Executive Director Anwar Shirpurwala told the media.

MAIT represents leading IT hardware companies like Dell, Lenovo, HP, Acer, Cisco, HCL Infosystems, and Intel etc.

Duty benefits

The Centre, in budget 2015-16, had exempted mobile phone and tablet PC manufactures in India from payment of customs duty and excise duty on procurement of all goods required for manufacturing, MAIT said in it submission.

To boost local manufacturing of mobile phones and tablets, the Centre in the Budget had increased duty benefits for domestic producers of these electronic items.

Excise duty structure for mobile handsets was changed to 1 per cent without CENVAT credit, or 12.5 per cent with CENVAT credit, which gave domestic manufacturers a benefit of about 11 per cent over imported phones.

Foreign firms

The current fiscal year saw investments from manufacturing giant Foxconn in the country, while many other mobile phone companies like Gionee, Xiaomi, Lava, Karbonn, HTC, Datawind, started production of their handsets locally.

The industry body said the Centre has removed Special Additional Duty (SAD) – a tax imposed to provide cushion from products purchased at zero duty – from components used for manufacturing computers, which compelled domestic manufactures to use imported motherboards that are cheaper. To encourage local production of computers, MAIT has requested the Centre to exempt all inputs, except populated Printed Circuit Boards, required for use in the manufacture of ITA(Information Technology Agreement)-bound goods from SAD.

India is signatory to ITA 1 as a member of World Trade Organisation. Under ITA 1 agreement, member countries should allow duty free import of products falling under eight categories covering telecom, computers and semiconductors like mobile phones and electronic chips.

Excise exemption

MAIT said components used for manufacturing of PCBs or motherboards should have been exempted from SAD.

The industry body has sought exemption of excise holiday for a further period of 10 years in Uttarakhand and Himachal Pradesh, as all units are already in operation there, including those units for which the exemption may have expired in 2013.

“Likewise, any new units commencing production on or before March 31, 2016 may also be bestowed with central excise exemption for a period of 15 years. This will give the manufacturing sector the required boost to compete with traders,” Shirpurwala said.

Agencies