Budget 2017: MAIT On Domestic IT-Electronics Manufacturing

Electronics Manufacturing

Bengaluru: As the Union Budget 2017 will be presented by the FM on 2017, Manufacturers’ Association of Information Technology (MAIT) has brought forward some key recommendations to enhance India’s image as an attractive investment and manufacturing destination.

The executives believe the Budget is an attempt to enhance electronics hardware manufacturing capabilities which is still mired due to myriad challenges including high costs of power and finance, high transaction costs, prevalent tax structure and lack of development of a healthy supply.

Here are the key highlights of MAIT’s pre-budget recommendations for 2017-2018:

Extension of Concessional Duty Benefits to all ITA goods, including PCs and Servers:
Extension of concessional Excise and Customs Duty benefits to all ITA goods is crucial to achieve the vision of ‘Make in India’ for IT hardware as well as to achieve the goals of ‘Digital India’; extending such benefits merely to a few products such as mobile phones and tablets would defeat the purpose of the government’s initiatives. Extending concessional duty benefits to locally manufactured IT-Electronics equipment will help in attracting investment, increase employment opportunities and likely trigger innovations in design and manufacturing to address local needs. It is very important that the concessional indirect tax structure is continued under the new GST regime, to allow investments in local manufacturing to bear fruit.

Comprehensive List of CPE Goods for inclusion under the Duty Differential Scheme:
The list of Customer Premise Equipment (CPE) goods needs to be updated and made comprehensive so as to ensure that the benefits reach all stakeholders. Networking Switches, Wired and Wireless Access Points, USB Adapters and Wireless Access Controllers are the goods that must be included under the excise duty concession scheme, or preferential rate of GST at 12%, post April 2017.

Harmonization of IT Product Lists across Central and State indirect tax jurisdictions:
Harmonization of IT Product Lists across central and state indirect tax jurisdictions is necessary to ensure that industry players are able to claim benefits on IT goods that are rightfully theirs and avoid unnecessary litigation. A detailed list issued by the Central Government can be used as a reference guide by states to re-tune/re-determine their lists of products covered under the IT goods list, under the relevant VAT laws.

In this regard, it would also be necessary that directions are issued to state governments to ensure that a ‘Uniform List of IT Goods’ is maintained under the merit rate category.

Establishment of ‘Convergence Cell’ to provide impetus for the ICT Sector:
A ‘Convergence Cell’ needs to be established whose role would be to classify new IT products within 30 days of representation by industry. This measure will help to reduce delays, confusion as well as tax litigations arising out of classification issues.

Nitin Kunkolienker, Vice President, MAIT and Director-Corporate Affairs, Smartlink Network Systems stated, “We have requested the Honorable Minister of Finance and his team to focus on formulation and promotion of schemes to encourage manufacture of Customer Premise Equipments in India to cater to the needs of the local market and help achieve the goals of government’s ‘Digital India’ program. Further, the vision of ‘Make in India lies in local value addition, domestic manufacturing and empowerment of Small and Medium Enterprises so that overall volume of domestic IT-Electronics manufacturing goes up. Suitable policy interventions at this critical juncture will help Indian firms scale up their operations and become significant players in the global supply chain.”

“Industry needs an integrated approach towards ‘ease of doing business’ through key policy measures addressing all related issues in the area of manufacturing, standards and compliances such as CRO, import-export procedures, skills development and demand generation,” Kunkolienker added.

Anwar Shirpurwala, Executive Director, MAIT said that there is a need to develop a robust ecosystem to reduce the overall cost of production so that local IT manufacturers can compete at the global level. The existing capabilities of IT manufacturers have so far remained underutilized due to adverse tax policies and absence of quality infrastructure.

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