IT Ministry urges tax sops for PC manufacturers too

February 16 21:19 2019 Print This Article

The Ministry has also suggested that specified capital goods for the manufacture of electronic goods be exempted from basic customs duty and countervailing duties

The Ministry of Electronics and Information Technology has urged the Finance ministry to retain the differential excise duty regime and tax exemptions granted for the manufacture of mobile handsets and tablets, under the impending Goods and Services Tax regime, to prop up domestic manufacturing of electronic products.

In its key recommendations for the Union Budget 2017-18, the Ministry has suggested that these exemptions be expanded to personal computers and servers, as per the Phased Manufacturing Roadmap it has worked out in consultation with the Centre’s think tank NITI Aayog.

“We have recommended that differential Excise Duty dispensation available to mobile handsets, tablets and specified Customer Premises Equipment be continued under the upcoming GST regime as it would be a key requirement to continue and further accelerate the growth momentum which has been witnessed particularly in the mobile handsets manufacturing sector over the past 12 months,” a senior official in the Ministry told The Hindu.

The current duty dispensation is 12.5% countervailing duty (CVD) versus 1% excise duty (without input credit of excise duty paid on the goods). Differential duty makes imports of mobile handsets more expensive compared with making them locally, encouraging smartphone players to set up manufacturing units in India.

Employment generation

Over the past one and a half years, about 40 new mobile factories have come up in the country, generating direct employment for more than 40,000 people and indirect employment for 1.25 lakh people.

The Ministry has also suggested that specified capital goods for the manufacture of electronic goods be exempted from basic customs duty and countervailing duties.

“There is hardly any domestic capital goods industry for the manufacture of electronic goods and these are largely imported, being very specialised equipment with limited number of global suppliers.”

Capital goods

“In order to increase the competitiveness of the Indian electronics Industry by offsetting disability costs in domestic manufacturing to a certain extent, it is recommended that all capital goods for the electronics industry be exempted from customs and countervailing duties,” the official explained.

To promote indigenous manufacturing of LCD and LED panels, it has been recommended that the specified key raw materials and inputs for the manufacture of these panels may be permitted at 0% customs duty.

Software R&D

The ministry has also pitched for extension of income tax benefit for research and development (R&D) to software products and the chip design industry.

The proposal is expected to boost the generation of intellectual property in the country.

“One of the requirements under section 35 (2AB) of the Income Tax Act of this is that the unit availing this benefit should have in-house manufacturing capability.

“In the Electronics and IT sector, the technology is encapsulated in software and design. Therefore, it is recommended that software products and chip design companies should be allowed the benefit of Section 35(2AB),” according to the senior Ministry official.

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