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Value Added Tax (VAT) which was expected to simplify State levies and bring in softening of prices to the consumer has turned out to be a nightmare in many cases. ELCINA Electronic Industries Association of India says, electronic components and assemblies sector has been hit hard by VAT.
It has been the declared policy of the Government and clear guideline of the White Paper on VAT that all Industrial Inputs will be charged VAT at the lower rate of 4% since they are used in manufacturing and not purchased directly by consumers. While a few electronic components have been included in the 4% List, many others which are critical inputs for Electronic and Hardware Equipment, have been left out and are being subjected to 12.5% VAT. The ELCINA Secretary General, Mr.Rajoo Goel, says, this has come as a rude shock to the Electronics Industry and indigenous production of electronic components and assemblies has become unviable. VAT has come at a time when local manufacturers of ICT products and electronic components are already facing the brunt of zero import duty under the Information Technology Agreement of WTO, which was enforced last March.
This puts local manufacturers at a severe disadvantage vis-à-vis imports which are duty free and attract only 4% Addl Customs Duty. ELCINA members bemoan the irony that while everything is being done to encourage imports, the interests of local production are being by-passed. This is revealed by the fact that while the Additional Customs Duty of 4% on imports is allowed to be set off against excise duty, 4% CST paid on inter-state purchases of indigenous industrial inputs is not vatable. This makes local manufacture even more uncompetitive because it gets subjected to 12.5% VAT while an imported component at zero duty plus 4% Addl CD can get sold in the unorganized market at a much lower price.
ELCINA representatives met the Parliamentary Standing Committee on Industry last April, when they were assured by senior Delhi State and VAT officials that all industrial inputs will be covered under 4% VAT. The officials assured the Committee that all items including electronic components and assemblies which were covered @4% before enforcement of VAT would continue at the same rate. To the industry’s surprise this assurance has not been honoured and officials have refused to cover electronic components and assemblies @4%. They continue to attract VAT of 12.5%.
ELCINA apprehends that if rationalization of VAT at 4% for electronic components and even non-electronic components which are industrial inputs is not enforced and other anomalies eliminated immediately, many units, specially small and medium enterprises will be forced to close down.
New Delhi, July 13, 2005
RAJOO GOEL, SECRETARY GENERAL, ELCINA
ELCINA Electronic Industries Association of India
ELCINA HOUSE, 422 Okhla Industrial Estate
New Delhi - 110 020, India
Tel: 26924597, 26928053 ; Fax: 26923440
Website: www.elcina.com
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