Reprieve for IT hardware industry

The electronic hardware industry is bullish on removal of 4 per cent special additional duty (SAD) on personal computer (PC) components and imposition of education cess on imported electronic products.

MAIT president Amar Babu said the Budget, from an IT industry perspective, is a mixed bag with the inverted duty structure finally addressed by the removal of SAD on all components.

“The removal of customs duty on components and concessional structure of 2 per cent without CENVAT credit are positive steps to encourage tablet manufacturing in India. However, it is disappointing that no initiatives have been taken to increase PC manufacturing and promote exports. In this Budget, we might have missed an opportunity to drive ‘Make in India’ in computers,” he said.

Giving impetus to Modi’s ‘Make in India’ programme, Finance Minister Arun Jaitley announced a slew of measures to dethrone the inverted duty structure in the IT / electronic hardware industry to bring it out of the rut.

During the Budget speech, Jaitley said: “I propose to reduce the rates of basic customs duty on certain inputs, raw materials, intermediates and components (in all 22 items) so as to minimise the impact of duty inversion and reduce the manufacturing cost in several sectors.”

The finance minister wanted to bring some ease in the indirect taxes in the sector taking into account the government’s concerted efforts to promote domestic manufacturing. “I propose to fully exempt all goods, except populated printed circuit boards, for use in manufacture of ITA-bound items from SAD and reduce the SAD on imports of certain other inputs and raw materials subject to actual user conditions,” Jaitley said.

According to industry analyst, these changes will help address the problem of CENVAT credit accumulation due to the levy of SAD.

Excise duty structure for mobiles handsets, including cellular phones, is being changed to 1 per cent without CENVAT credit or 12.5 per cent with CENVAT credit. Earlier the duty structure for mobiles was 6 per cent with CENVAT credit. For tablet computers, the duty structure is “2 per cent without CENVAT credit or 12.5 per cent with CENVAT credit.”

“Besides claiming duty benefits on VAT paid on purchase of various input materials, the local manufacturer will benefit from the increase in CENVAT credit for those imported items,” said IESA Chairman Ashok Chandak.

According to Applied Materials India president Aninda Moitra, Budget 2015 is directionally positive for manufacturing, although specific focus on the ESDM sector would have been encouraging.

“The Budget certainly shows the desire to make India investor friendly, and is promising on the whole for the growth of our economy. We welcome the emphasis on skills development and employability, which, as Applied Materials has consistently advocated,”he said.

Indian Cellular Association National President Pankaj Mohindroo said that government’s announcement on CENVAT leads to increase in countervailing duty on imports to 12.5 per cent imposed on imported mobile and tablets, which is going to make strong case for manufacturing within the country.