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A positive budget but arms length treatment to Electronic Hardware

After maintaining status quo in the last budget the FM has taken a definite step forward under the severe constraints imposed on him by the political dispensation. The emphasis on infrastructure and rural development is welcome, though the ultimate test is in the implementation of the ambitious schemes. ELCINA, the apex body for electronic component manufacturers, is encouraged by the FM’s clarification that all ITA-1 items and their inputs would be importable at zero duty. The industry hopes that this would be allowed on a self declaration basis so that ALL inputs without exception or ambiguity, are covered by this diktat. An effort has been made to provide a level playing field by imposing additional customs duty of 4% on ITA-1 items and their inputs. However, this will not provide the necessary cover for domestic electronic component manufacturers because this additional duty can be offset against excise payable by manufacturers. ELCINA President Mr RG Deshpande comments that “a local component manufacturer will be subject to CST which is not vatable, while a manufacturer-importer of electronic components will be able to offset the 4% additional duty and to that extent the imported component will be cheaper and more attractive for electronic equipment manufacturers. The solution to this anomaly is to make CST vatable”. The budget also addresses the issue of dual use inputs and basic metals which have been brought down from 15 to 10% Customs Duty. This will have an all round salutary effect on costs and lower prices of electronic products. The budget however has not touched upon the electronics hardware sector’s long pending request for according it special sectoral status. This is the first sector to face zero duty and unbridled global competition. The industry was keenly looking forward to lower costs of essential inputs such as energy and finance, lowering of excise duty to expand the market and liberal labour laws to provide the necessary flexibility to compete with global giants. Implementation of State VAT is a welcome step but, the budget does not specify a time frame for abolition of CST and bringing in a Composite VAT which would be seamless across all states of India. Maybe the time for this announcement was not right due to the sensitive nature of the issue. Thus, though the Budget makes an effort to address the zero duty issue, but does not take care of the special sector treatment which Electronic Components so desperately require. New Delhi, March 01, 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 << back