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ELCINA Electronic Industries Association of India (Formerly Electronic Component Industries Association) was established in 1967 when India's Electronic industry was still in its infancy. ELCINA has always remained committed to the promotion of electronics manufacturing culture in the country focusing on components-the building blocks of electronics industry.

  • I-T benefit for software extended upto March 2010 : In a huge relief to the IT industry, software companies have been allowed to enjoy income tax benefits for one more year from March 2009 to 31st March 2010.
  • RBI hikes CRR, Interest Rates unchanged : The Reserve Bank of India in its annual policy review increased CRR (cash reserve ratio) by 25 basis points to 8.25% with effect from May 24, 2008, and kept interest rates unchanged.
  • Fixed-line telephony to be exempted from licence fee : At a function organized by COAI recently, the Telecom Minister Shri A. Raja has said that the fixed-line telephony will be exempted from licence fee to encourage service providers, especially those in the private sector, to go to the rural areas. BSNL will be the largest beneficiary of this move as it will save upto Rs.1,200 crore annually. Private operators such as Airtel, Reliance and Tata have minimum presence in the landline space. Currently, telecom operators pay 6-10% of their total revenues, including revenue from landline and broadband, towards licence fees, charged as percentage of AGR.
  • Merger norms for telecom tightened : The Department of Telecommunications (DoT) has issued guidelines significantly tightening the noose on mergers among telecom operators within a circle by imposing a three-year lock-in period, besides making it mandatory for them to take prior permission from the Ministry. It has also made post-merger rules on retention of spectrum much more stringent. According to the existing policy, operators do not need prior permission from DoT or have a lock-in period for mergers.
  • CBEC issues instructions for timely payment of refund claims to exporters : Government of India has already notified refund of service tax paid on sixteen taxabale services, whether or not input services, use of which could be attributable to export goods, based on verifiable methods. Through a separate circular dated 17th April, 2008, CBEC has instructed all field formations to ensurely timely and expeditious payment of refund claims to exporters. Accordingly, any refund claim which is not finalized within a period of 30 days from the date of filing is required to be reported by the Commissioner to the concerned Chief Commissioner and any refund claim not finalized within 45 days, for whatsoever reasons, has to be reported to the CBEC. Field officers have also been instructed to take special efforts to dispose of refund claims of small and medium exporters on priorty basis. Above circular is available on CBEC website – http/www.cbec.gov.in.
  • DoT plans limited 3G auction by 2008-end : The Department of Telecom (DOT) plans to auction third generation (3G) spectrum in two phases – the first by 2008-end and the next after March 2009. This is because the alternate network for the defence forces, which will result in vacation of radio frequencies for 3G, will be ready only by March 2009.
  • Notifications :
    • CBEC Circular No.341/15/2007-TRU dt. 17th April, 2008 : Instructions for timely payment of refund claims to exporters.
  • Highlights of Annual Supplement to FTP 2008-08 :
    • DEPB Scheme extended till May 2009.
    • IT hardware brought under special focus
    • IT exemption for 100% EOUs extended by a year till March 2010
    • Reduced interest rates for rupee-hit and small exporters extended by a year
    • Average export obligation under EPCG scheme lowered, large exporters can cut commitments
  • EOUs, STPIs get excise, customs duty benefits : Through notifications issued by CBEC, the Finance Ministry has permitted EOUs and STPI units to subcontract abroad and sell the finished goods directly from there without having to bring them back to India. This move will help such units significantly lower transaction costs as earlier semi finished or semi processed goods sub congtracted abroad had to be brought back to the country before exporting them. In the same notification, the CBEC has also hiked the customs and excise duty exemptions for spares and components to 5% of the free on board value of the articles manufactured for export out of India by the unit during the preceding year. This was earlier at a mere 1.5%.
  • State FMs arrive at CST relief formula : State governments on 16th April/08 finalised a compensation formula for the revenue shortfall after the cut in CST from 3% to 2%, which is likely to come into effect from 1st May, 2008. This may result in Central Government providing around Rs.7000 crore to States in 2008-09. In order to partially offset the loss due to the CST rate cut, the Centre will pass on the service tax collections from 33 services to States
  • Notifications :
    • Policy Circular No.1(RE-08)/2004-2009 dt. 11th April, 2008 : Clarification regarding Service Tax Refund.
  • DEPB Scheme extended till ‘further amendments’ : According to a Public Notice issued by DGFT on 29th March, 2008, the government has extended till further amendments the DEPB Scheme, used by exporters to remit duties on exported products. The scheme was to expire on 31st March, 2008.
  • Govt nod to ITIRs : The Cabinet Committee on Economic Affairs (CCEA) at its meeting held on 3rd April/08 approved the proposal to create Information Technology Investment Regions (ITIRs), which have been conceptualized to boost the growth of IT, IT-enabled services and electronic hardware manufacturing (EHM)units. These regions could include new integrated townships, SEZs and industrial partsm and would also have residential area, social infrastructure and administrative services. These units will be built through the public-private partnership route. State governments will select the deverlopers and co-developers through a transparent bidding process. Each ITIR is expected to be a specifically notified investment region with a minimum area of 40 sq.km planned for IT and Electronics Hardware Manufacturing units. The minimum processing area will be 40% of the total area of the ITIR.
  • Easier FDI norms for SSI likely : In a move aimed at easing the flow of funds to small scale industries (SSIs), the Centre proposes to allow foreign direct investment (FDI) into the sector through the automatic route. The relaxation is in line with the government’s efforts to modernize SSIs, given their huge employment potential. Under existing norms, FDI in sectors reserved for SSIs is currently routed through FIPB and requires prior government permission. Once implemented, regulators such as RBI need be informed of such investments only after they have been made.
  • TRAI abolishes ADC from 1st April, 2008 : In line with its laid down roadmap, Telecom Regulatory Authority of India (TRAI) on 27th March/08 abolished the Access Deficit Charge (ADC) with effect from 1st April, 2008. ADC is the amount payable by private telecom operators to BSNL for sustaining its rural wireline network. The regulator has also slashed the ADC on international long distance calls to 50 paise from Re.1 on incoming calls, which may also be phased out in Sept/08. As a result, a reduction in mobile tariff is expected, as leading telecom operators are expected to pass the benefit to their customers.
  • Govt panel to review duty drawback rates : Faced with the outcry of exporters for relief from the rupee rise, the government has set up a high-level committee for formulation of All Industry duty drawback rates for 2008-09. The 3-member Committee comprises Member, Economic Advisory Council to PM, Shri Saumitra Chaudhury, Secretary in Finance Ministry, Shri SB Mohapatra and Chief Commissioner of Customs & Central Excise (retired), Shri T.R. Rustagi. In this regard, Drawback Directorate has issued letter dated 18th March, 2008 seeking necessary data from the industry. The Comnmittee is expected to submit its report by May.
  • 3-month delay in number portability : The implementation of mobile number portability (MNP) is likely to be delayed by three to six months due to lack of infrastructure. Communication Minister had announced the implementation of MNP by the 4th quarter of 2008. DOT has to form a consortium of operators, which, turn, has to set up a central database of operators and their subscribers. Rules and regulations have also to be formulated and approved by TRAI.
  • DEPB Scheme may get another extention : The duty entitlement pass book (DEPB) scheme is likely to get another lease of life, with the government planning to give one more extension. The scheme is scheduled to expire on 31st March, 2008 and no substitute to the DEPB has been formulated so far.
  • DOT proposes tough rollout obligations for 3G : The Department of Telecommunications, in its guidelines for auction and allotment of spectrum for 3G services, has proposed stiff network rollout obligations for next generation (3G) mobile service providers, failing which they will have to pay a hefty penality for boarding spectrum or the radio frequency.
  • Notifications :
    • Customs Notification No.34/2008 dt. 13th March, 2008 : Imposing anti-dumping duty on imports of Compact Discs-Recordable (CD-Rs) originating or exported from Iran, Malaysia, Korea ROK, Thailand, UAEs and Vietnam. The duty amount ranges from Rs.0.74,Rs.1.11,Rs.2.27,Rs.2.63,Rs.3.04,Rs.3.08, Rs.3.09 & Rs.3.23 per piece, depending upon the country of origin and country of export.
  • Govt to introduce Bank Realisation Certificate Module On Duty Drawback from 1.4.2008 : CBEC has sought comments/suggestions by 26th March, 2008 about the new module being introduced from 1st April, 2008. Details are available on the CBEC website - www.cbec.gov.in
  • Notifications :
    • Customs Notification No.32/2008 dt. 5th March, 2008 : Amending Notification No.69/2004-Customs dated 9th July, 2004 to add S.No.54 (after 53) with description of goods “All goods falling under tariff items 8517 12 10 and 8517 12 90”
    • Public Notice No.122 (RE-2007)/2004-2009 dt. 4th March, 2008 : Through this Public Notice, a subparagraph has been added in Para 3.2.5 III of Handbook of Procedures (Vol.1), so as to provide that licensing authority shall endorse the name of the supporting manufacturer on the certificate as co-licensee. Consequently, listed supporting manufacturers shall be ‘co-licensees’ for DFCE for Status Holders Scheme 2003-04 issued under Para 3.7.2.1(vi) of the Export and Import Policy (RE2003) and duty credit scrips which have been already issued under the scheme shall be deemed to have been amended to this extent..
    • Policy Circular No.31(RE-07)/2004-2009 dt. 29th Feb/08 : Clarification regarding requirement for return of original TR-6 Chalan evidencing payment of customs duty for the excess raw material imported against Advance Authorisation Scheme.
    • Notification No.S.O.246(E) dt. 5th Feb/08 : Notifying the list of 79 de-reserved items for exclusive manufacture in the micro and small enterprise sector (SSI). This list includes : Voltage stabilizers – domestic type upto 5 KVA, PVC wires-domestic type, Exhaust fans upto 460 mm, Electrical light fitting chokes & starters, Amplifiers for entertainment and public address system.
  • FM hints at 14% GST rate : During the post-budget meeting of CII on 4th March/08, Finance Minister P. Chidambaram hinted at a central goods and service tax (GST) rate of around 14%. GST is scheduled to be implemented from 1st April, 2010 and there will be one or more Central and State GST rates for all goods and services.
  • Highlights of Union Budget 2008-09 : The Union Minister of Finance, Shri P. Chidambaram presented the Budget Proposals for 2008-09 in Parliament on 29th Feb/08. The main highlights of the Budget are:
    General
    • GDP Growth rate projected @ 8.7% in 2007-08 compared to 9.6% in 2006-07
    • Avg growth rate in last 4 years is >8.5%
    • Growth in Manufacturing Sector decelerated to 9.4% from an unexpectedly high 12% in 2006-07.
    • Growth in Services sector estimated @10.7 % compared to 11.2% in 2006-07.
    • Emphasis on Inclusive growth, Education, Health and Infrastructure expansion continues
    • Concerns about oil prices and food grain prices, overall inflation and sluggish growth of agricultural output
    • CST reduced to 2% wef 1-4-08 and re-confirmation of movement towards a consolidated GST by 2010.
    • Risk Capital Fund being created in SIDBI for Micro, Small & Medium Enterprises (MSME’s)
    • A non profit corporation to be established to address the challenge of Skill Development required by India’s growing economy (under Skill Development Mission)
    • Few inputs added to Notif 25/99 for zero duty imports and additional inputs for Set Top Boxes brought to zero CD
    • No additional support or consideration for high value added IT/Hardware manufacturing
    • Appreciable increase in Individual Direct Tax Exemption limits
    • No change in Corporate Tax
    Customs Tariff (CT) & Excise Duty (ED) Highlights
    Customs
    • Peak rate of customs duty on non-agricultural products remains at 10%
    • Customs duty on project imports attracting 7.5% has been reduced to 5%.
    • Customs duty on specified convergence products has been reduced from 10% to 5%.
    • Customs duty on specified raw materials and inputs for use in IT/electronic hardware industry has been reduced from 10%/7.5% to Nil, on end-use basis.(Notif no. 25/2008-Cus)
    • Customs duty on specified parts of set-top boxes has been reduced from 7.5% to Nil on end-use basis. (Notif no. 21/2008-Cus)
    • Customs duty on iron or steel melting scrap has been reduced from 5% to Nil.
    • Customs duty on aluminium scrap has been reduced from 5% to Nil.
    • Customs duty on phosphoric acid has been unified at 5% irrespective of its use.
    Central Excise
    • General rate of excise duty (CENVAT) has been reduced from 16% to 14%. The other ad valorem rates of 24%, 12% and 8% remain unchanged.
    • Excise duty has been fully exempted on Wireless data modem cards. Consequently, CVD shall also be exempted on imported cards. 4% additional duty of customs will, however, be applicable.
    • Excise duty has been reduced from 16% to 8% on specified Convergence Products.
    • Excise duty has been increased from 8% to 12% on packaged software.
    • National Calamity Contingent duty (NCCD) at the rate of 1% has been imposed on mobile phones. On imported mobile phones, this duty shall be levied as additional duty of Customs under section 3(1) of the Customs Tariff Act, 1975.
    • National Calamity Contingent duty of 1% currently leviable on Polyester filament yarn has been withdrawn.
    Miscellaneous:
    The rate of duty applicable to clearances of goods to domestic tariff area from export oriented units, software technology parks, electronic hardware technology parks etc. has been revised from ‘25% of the basic customs duty + excise duty payable on like goods’ to ‘50% of the basic customs duty + excise duty payable on like goods’.

    Consequent upon reduction of excise duty rates on specified goods leviable to excise duty on retail sale price basis, abatement rates for such goods have been revised suitably.
    • Economic Survey push for reforms :The annual Economic Survey for 2007-08, presented to the Parliament on 28th Feb/08 by the Finance Minister, indicates that India’s economy has moved to a higher growth trajectory, but sustaining the momentum requires bold policy moves. Coming at a time of turmoil in global financial markets, the Survey warned of possible spike in inflation and how it could make the task of sustaining growth even more duating. The new challenge is to maintain growth at these levels, not to speak of raising it further to double digital levels. After tabling the Survey in Parliament, the Finance Minister said “Optimisium with caution” would be the watchword for 2008-09. The Survey indicates : Economic Growth of 8.7% against 9.6% in 2006-07, Inflation rate to decline ffrom 5.6% in 2006-07 to 4.4% in 2007-08, Exports reach $111 billion in first 9 months of 2007-08, Imports grow 25.9%, FDI inflows reach $11.2 billion.
    • Highlights of Railway Budget for 2008-09 : Some of the main features of the Railway Budget announced by the Railway Minister Shri Lalu Prasad, on 26th Feb/08, are : No hike in freight rates, 5% reduction in petrol & diesel rates, freight loading target upped by 7.6% to 850 mt in 2008-09, Railways to use PPP route to attract Rs.1 lakh crore investment, AC & 2nd class fares reduced Booking through mobiles, e-tickets for waitlisted passengers, Rs.75,000 crore for infra upgration, 20,000 new wagons by 2009, plans to upgrade railways with new technologies..
  • Notifications :
    • Notification No.29/2008-Customs dt. 1st March, 2008 – Imposing 1% NCCD as Central Excise on mobile phones manufactured in India and as additional customs duty on imported mobile phones.
    • Notification No.25/2008-Customs dt. 1st March, 2008 : Reducing customs duty on specified raw materials and inputs to Nil by adding to Notfin No.25/99
    • Notification No.21/2008-Customs dt. 1st March, 2008 : Reducing customs duty on specified parts of set top boxes from 7.5% to Nil on end-use basis.
    • Public Notice No.113 dt.15-2-2008 : Amending Appendix 17D and Paras 3.2.5.III & 3.2.5.VII of Handbook of Procedures for Target Plus Scheme 2004-05 & 2005-06.
    • Public Notice No.111 dt.15-2-2008 : Procedure amended for DFCE & Target Plus Scheme for status holders.
    • Public Notice No.106 dt. 6-2-2008 : Amending the procedure for claiming duty credit scrip under Target Plus Scheme 2004-05 in terms of para 3.2.5(III) of the Handbook of Procedures (2004-2009), Vol.1 (revised edition 2004) to support manufacturers.
  • Govt extends the tax refund scheme for 3 more services and approves Rs.500-crore interest subvention package to help exporters : The Finance Ministry, through Notification No.3/2008-ST dt.19th Feb/08, extended the service tax refund scheme for exporters to three more services – for transporting goods from a factory/other premises to the actual place of export, rail transport for moving export goods in containers to the place of export and courier services for transporting export-related items to foreign destinations. With this, 13 services used by exporters have been made eligible for refund of the tax liability.
    On 21st Feb/08 the government also approved a Rs.500 crore additional package in the form of interest subvention for exporters to compensate them for the reduction in profits due to rupee appreciation against the US dollar. The interest subvention is subject to the condition that interest rate on loans will not fall below 7% - rate applicable under priority sector lending scheme. Earlier, the government had announced Rs.300 crore under this scheme.
  • DOT approves TRAI’s reco to share active infrastructure by service providers : In a move that will help Telcos lower tariffs and reduce overall expenditure by well over 50%, the Department of Telecom (DoT) has approved TRAI’s recommendation to let service providers share active infrastructure. Indian telecom companies are permitted to share only passive infrastructure, such as towers, repeaters, shelters and generators. Active infrastructure sharing will allow operators to use all key electronic components, including antennas, feeder cables, nodes, radio access network, transmission systems and backhaul. New entrants will be able to use set-up of existing players and launch services within a short span.
  • Notifications :
    • Notification No.3/2008-ST dt. 19th Feb/08 – Extension of service tax refund for 3 more services.
    • Customs Circular No.4/2008 dt. 12th Feb/08 – Regarding Valuation practice of second hand machinery to be adopted by all Customs Houses/Customs Commissionerates.
  • Manufacturing Panel seeks sops : The Prime Minister’s Panel on manufacturing sector is understood to have suggested urgent fiscal measures in the Budget to reverse deceleration in growth in several sectors. The high-level committee, headed by Chairman of the National Manufacturing Competitive Council (NMCC), Shri V. Krishnamurthy, has submitted its report to the PMO, and the recommendations are likely to be implemented in the Budget. The PM has constituted the Committee in the wake of weaknesses witnessed in the manufacturing sector. Besides suggesting short-term steps, the Committee was mandated to recommend long-term measures to ensure that the factory sector continues to grow fast in the nxt 10 to 15 years. Growth in the industrial production plunged to 5.3% in November this fiscal from 15.8% in the comparable period of 2006-07 following a sharp decline in the manufacturing sector. The six core infrastructure industries also declined to 5.3% in Nov. 2007 from 9.6% and to 7.6% in Dec/07 from 13.4% a year ago. The manufacturing sector has over 80% weightage in the overall industrial production.
  • 79 items de-reserved in small scale sector : The government has excluded an additional 79 items from a list of 114 items which can be exclusively manufactured in the small scale sector. With this de-reservation, only 35 items can be manufactured in the SSI sector. The government has been de-reserving items in gradual and calibrated manner to increase competitveness of the industry, facilitate adequate flow of credit and upgrade technology. The move would also enable the Indian industry to compete with imports, achieve economies of scale and create job opportunities.
  • Notifications :
    • Policy Circular No.29(RE-07)/2004-2009 dt. 6th Feb 2008 : Clarification regarding clubbing of Advance Authorisations under paragraph 4.20 of HBP Vol.1.
    • Customs Notification No.14/2008 dt. 4th Feb. 2008 : Further amending S.No.14, in col.(3) in the Explanation, in Not. No.39/96-Customs dt. 23rd July, 1996.
  • Govt plans to restrict cheap imports : In a long overdue move that is expected to cheer the domestic industry complaining of facing onslaught from cheap imports, the government is set to arm itself with powers to ipose quantitative restrictions (QRs) to bar import of these items. The initiative, first-talked about in 2000 when import curbs were lifted is once again beibng pushed through amendments to the Foreign Trade (Development and Regulation) Act. The Commerce Ministry, which is piloting the Bill, would be empowered to initiate investigation on items where is a spurt in imports and “threaten to cause serious injustry to domestic industry”. As a part of flexibility being offered to developing countries, the government can restrict import of a particular item from a developing country if its share in total Indian imports exceeds 3%.
  • RBI’s Monetary Policy – Rates unchanged : The Reserve Bank of India, in its third-quarter review of the Annual Statement on Monetary Policy 2007-08 on 30th Jan/08 took a neutral stance, leaving the bank, repo and reverse repo rates as well as the CRR unchanged. The Central Bank also gave sufficient indication that it was according priority to anchoring inflation and it was closely monitoring the liquidity overhang. RBI retained the bank rate and reverse repo rate at 6%, Repo rate at 7.75% and cash reserve ratio (CRR) at 7.50%.
  • Notifications :
    • Notification No.72(RE-2007)/2004-2009 dt. 22nd Jan/08 : Making amendment in the provision for Exit from EOU Scheme (Para 6.18 of FTP 2004-09), replacing the existing para 6.18(d) by the following:-
      "An EOU/EHTP/STP/BTP unit may also be permitted by Development Commissioner, to exit from the scheme on payment of duty on capital under the prevailing EPCG Scheme for DTA units. This will be subject to fulfillment of positive NFE criteria under EOU scheme, eligibibility criteria under EPCG Scheme and standard conditions indicated in HBP V.1".
      (Existing para 6.18(d) : “An EOU/EHTP/STP/BTP unit may also be permitted by Development Commissioner, to exit from the scheme on payment of duty on capital under the prevailing EPCG Scheme as a one time option. This will be subject to fulfillment of the eligibility criteria under that scheme and standard conditions indicated in Handbook (Vol-1)”.
    • Policy Circular No.28/07 (2004-2009) dt. 22nd Jan/08 : Explanatory note to Public Notice No.99 (RE-2007) dt. 8.1.2008
    • Central Excise Notification Nos.03/2008-NT and 04//2008-NT, both dt. 18th Jan/08 : Amendments in Central Excise Rules.
  • Govt introduces Abatement Rates for IT products : While announcing the abatement rates for various items through a notification issued by CBEC, the government has introduced Maximum Retail Price based taxation for various IT related products, including Computers, Modems and Set Top Boxes. Accordingly, the excise duty on these products will be levied on the basis of retail sale price with effect from 25th January, 2008.
  • Peak customs duty likely to stay due to poor exports : Peak customs duty, which stands at 10%, is unlikely to be cut in Budget 2008 following a slow down in the manufacturing sector and negative growth in labour-intensive exports. The target is to cut to 4.5-5% by 2010.
  • Govt mulls another round of export sops : The government is considering another set of measures – the fourth in 2007-08 – to help exoporters cope with a rupee that has strengthened 13% since April, 2007. The measures include Capital Goods imports through EPCG Scheme at zero duty. These measures are part of a package of nine concessions that were suggested by the Commerce Ministry around eight weeks ago and are awaiting Cabinet approval.
  • DOT rolls out revised spectrum policy : On 18th Jan/08, the Department of Telecommunications (DOT) came out with a revised spectrum-linked policy to GSM operators which is in line with the recommendations of the TRAI. The new policy is with immediate effect.
  • TRAI for 74% FDI in Mobile TV services : Broadcast regular TRAI has proposed 74% Foreign Direct Investment (FDI) in mobile television services and favoured bidding for allocation of licences for this service. Mobile TV services are current available in parts of Europe, US, South East Asia and Japan among other developed countries.
  • Notifications :
    • Excise Notification No.05/2008-Central Excise (N.T.) & No.06/2008-Central Excise (N.T.), both dated 24th Jan, 2008 : Introducing Abatement Rates from 25th Jan/08.
    • Policy Circular No.27(RE-07)/2004-2009 dt. 17th Jan, 2008 : Validity of Registration-cum-Membership Certificate (RCMC) and Councils authorized to issue RCMC.
    • Public Notice No.102(RE2007)/2004-09 dt. 16th Jan. 2008 : Amendments in the Handbook of Proceudres (Vol.1), (RE-2007), para 8.3.1(ii) and (iv).
    • Customs Notification No.10/2008 dt. 15th Jan, 2008 : Reducing customs duties on imports from Singapore on some items falling under Tariff 85.
  • Notifications :
    • Public Notice No.100(RE-2007)/2004-2009 dt. 10th Jan, 2008 : Amending the following paras in Handbook of Procedures, Vol.1(RE2006 & RE2007):- (A) Para 3.21.1 for Focus Product Scheme Replacement, (B) Para 3.22.2 for High-Tech Products Export Promotion Scheme Replacement, (C) Revised ANF 3E for Focus Product Scheme as annexed to the Public Notice, and (D) Para 3.20.1 for Focus Market Scheme Replacement.
    • Policy Circular No.26(RE-2007)/2004-2009 dt. 9th Jan/08 : Export of restricted/prohibited items, clarification regarding eligibility under Schemes under Chapter 3 of FTP 2004-09.
    • Customs Circular No.1/2008 dt. 9th Jan/08 : Allocation of Work relating to Trade Facilitation. Authorising DGEP (Directorate General of Export Promotion) to look after the work relating to 100% EOUs, SEZ, STPI and EHTP etc.).
    • Notification No.2/2008,F.No.149/278/2006-TPL dt. 8th January, 2008 : Amendments in Income Tax Rules, 1962 regarding eligibility of Industrial Parks for benefits under section 80-1A(4)(iii).
    • Public Notice No.99(RE-2007)/2004-2009 dt. 8th Jan/08 : Amendment in Handbook of Procedures, Vol.1(RE-2007), adding the following at the end of paragraph 5.7.4 “Additional Export Obligation (over and above indicated average) for all previous EPCG licences, which have not been redeemed, will be indicated separately”.
    • Public Notice No.97(RE-2007)/2004-09 dt. 4th Jan/08 – Amending Para 2.59.2 of Handbook of Procedures, Vol.1, regarding list of Agencies authorities (for ISO-9000 and ISO-14000 (Series) to grant quality certification.
  • 10-year tax holiday to jack up manufacturing : In a much-needed pre-budget bonanza to the manufacturing sector, which is showing signs of decleration, the government on 10th Jan/08 extended tax benefits to industrial units under a new Industrial Park Scheme, 2008. The scheme would provide a 10-year tax holiday under Section 80-IA (4)(iii) of the Income Tax Act, 1962. It extends a 100% IT rebate for 10 years to any undertaking, which has developed an industrial park between April 1, 2006 and March 31, 2009. All such industrial parks will have to take approval fro CBDT before availing of the tax breaks.
  • Target Plus Scheme gets tougher : In an effort to prevent misue of the Target Plus Scheme, the Central Board of Excise & Customs (CBEC) has issued fresh guidelines to tighten the noose on exporters using the scheme to evade duties. Only those goods imported by the exporter which fall under SION or have a ‘broad nexus’ with the final product would get benefits under the Scheme. Alternatively, it must be registered under the Scheme as inputs, capital goods, including spares, office equipment, professional equipment and office furniture by an importer for his own use or for the use of his supporting manufacturer(s), as declared in the Aayat Niryat Form.
  • Hardware, software makers may soon be able to invest in SEZs : Electronics hardware and software companies may soon be cleared to invest in SEZs and integrated townships. Plans to build integrated townships of up to 40 sq.km in area would keep the cost-competitiveness of the IT sector going even after the tax breaks offered under the STPI scheme come to an end in 2009. Mega-cities plans have been drawn up by the Department of Information Technology and identified as IT investment region. According to sources, the idea of developing a region jointly for the hardware and software sectors was mooted by the PMO after recommendations from industry bodies.
  • Notifications :
    • Policy Circular No.24(RE-2007)/2004-2009 dt. 1st Jan 2008 : Clarification regarding Merger(s) and Acquisition(s) of companies and/or firms during 1.4.2002 to 31.3.2006 and consequential grant of benefits under DFCE for Status Holders’ Scheme of the then EXIM policy and under Target Plus Scheme of Foreign Trade Policy.
    • Public Notice No.94(RE-2007)/2004-2009 dt. 1st Jan 2008 : Amendments in Foreign Trade Policy Hand Book of Procedures (Vol-I), adding the following at the end of paragraph 5.7.2 : "Export of SEZ units/supplies to Developers/Co-developers irrespective of currency of realization, would also be counted for discharge of Export Obligation".
    • Customs Circular No.45/2007 dt. 19th Dec/07 : Regarding Scope and Coverage of Goods to be imported under Target Plus Scheme (TPS).
  • Keep FDI cap on mobile TV at 74%,TRAI : Telecom Regulator TRAI on 3rd Jan/08 proposed that the government allow players to offer mobile TV services using any technology of their choice, and licences for this service be issued ‘through a closed tender system on the basis of a one-time entry fee (OTEF) quoted by the bidders’. TRAI has also recommended that the FDI in this sector be kept at 74% in line with the telecom sector. It also proposed that allocation of spectrum to mobile television licensees should be automatic for successful bidders and it should not require any further selection process.
  • Notifications :
    • Notification No.45/2007-Service Tax dt 28th Dec/07 : Sixth Amendments in the Service Tax Rules, 1994.
    • Notification No.42/2007-Central Excise (N.T.) dt. 27th ec/07 : Making the Central Excise (Compounding of Offences) Rules, 2005 more stringent.
  • States to collect tax under GST from 2010 : The Empowered Committee of State Finance Ministers has submitted its draft GST roadmap to the Union Cabinet for consideration next month. According to the draft recommendations, from 2010 onwards, the Central Government will levy and collect GST (Goods and Service Tax) on all India services like banking, insurance and telecom. In effect, Stastes will collect both Central GST and state GST on intra-state services, while the Central Government will collect both taxes on inter-state services. The states will transfer the Centre’s share from their collections as per the Central GST rate on services. The Centre will do the same while transferring states share in tax on services.
  • 24% investment cap on SSIs removed : In a development which is likely to increase participation of foreign players and big companies in small scale industries (SSIs), the government has formally announced doing away with the 24% investment cap in the sector. Announcing the development, the Commerce Minister, Shri Kamal Nath expects that this will lead to technology infusion in the sector as more and more foreign players and large companies set up their own SSI ubnits. An industrial unit is classified as an SSI when the investments is within Rs.5 crore.
  • Notifications :
    • Customs Circular No.42/2007 dt. 30th Nov/07 – Regarding grant of exemption from furnishing Bank Guarantee by Central/State Government Undertakings for inter-city transfer of goods from one bonded warehouse to another.
    • Circular No.860/18/2007-CX dt. 22nd Nov/07 – Making mandatory self-sealing of containers of export goods.
  • The government is set to remove the current foreign direct investment (FDI) cap of 24% for all companies in the small-scale industry (SSI) sector. SSI units will be allowed to raise foreign equity in accordance with caps governing the sectors in which they operate. According to newspaper reports, the idea is that SSI units must have access to technology and capital.
  • Commerce ministry readies impact check for FTAs Responding to the increasing political resistance to trade liberalization, the Commerce & Industry Ministry is planning to set up a special mechanism to monitor the impact of free trade agreements (FTA). Academic institutions like IIFT and RIS would be assigned the task of analyzing the impact of FTAs while the commerce department would put up a quick-response system to negate any adverse impact on India Inc. The move is significant since the domestic industry has been facing increased competition from overseas due to liberal imports
  • Appropriate authority for sanction and disbursement of drawback claims on supplies made by Domestic Tariff Area (DTA) units to units located in Special Economic Zone (SEZ) Doubts were raised as to whether the jurisdictional commissioners or Customs or Central Excise can sanction drawback claims against supplies made by DTA units to units in SEZ. According to Customs Circular No. 43/2007 dt. 5th December, 2007, it was clarified vide board’s circular No. 6/2005-Cus, dated 3.2.2005 that with operationalisation of the provision of Chapter X-A of the Customs Act, 1962 w.e.f. 11.5.2004, drawback is to be granted for the supplies made from the DTA to SEZ being the Dy./Asstt. Commissioner of Customs at the Customs Station of export shall be the authority for granting these drawback.
  • DEPB may stay: Fresh reports indicates that DEPB scheme may not be replaced with duty drawback scheme if the finance ministry doesn’t agree to remit state taxes paid by exporters. The Commerce Department is of the view that with steadily appreciating rupee, exporter can stay competitive only if all input taxes like octroi, electricity tax, mandi tax, sales tax on petroleum products and municipal cess are reimbursed .
  • Crucial administrative matters of special economic zones (SEZs) dedicated to the information technology sector will now be handled by directors of the Software Technology Parks of India (STPI), an autonomous body under the department of Information Technology (DIT).
  • India to cut tariff on 555 products from Singapore : Taking the currently operational India-Singapore Comprehensive Economic Cooperation Agreement (CECA) forward, the Union Cabinet on 30th nov/07 approved tariff elimination as well as reduction in additional 555 products. This will benefit exporters from Singapore. The Singapore CECA, signed in June 2005, was the first of its kind agreement that India signed with any country. The agreement not only entails duty cuts and reduction in duties on goods but also focuses on ways and means to increase trade in services as well as facilitation of investments. According to experts, more than trade in goods, India stands to gain from the services and investments components of the agreement. The decision also includes a clause that any additional benefits extended to the Asean FTA (of which Singapore is a member) in the future will also be extended to Singapore.
  • TRAI likely to implement CAC; choose your operator for making STD/ISD calls: Telecom subscribers would soon have the option of choosing long distance operators for making ISD and STD calls. The Telecom Regulatory Authority of India (TRAI) is likely to implement the much-delayed carrier access code (CAC) shortly. The move comes after recent DoT’s decision to implement mobile number portability. Once CAC is implemented, the subscriber of one operator can use the network of any other operators of their choice to make STD/ISD calls by dialing a prescribed code. This empowers consumers with more choice and brings about more competition in the long distance call rates.
  • States agree to dual GST by 2010 : A key milestone towards indirect tax reform in the country was achieved on 28th Nov/07 when the Empowered Committee of State Finance Ministers agreed to recommend to the Central Government for adoption of a nationwide dual Goods and Service Tax (GST) from April 01, 2010. The dual GST will operate at two levels – the Central and States. The tax rate is yet to be finalized. The dual GST model is expected to reduce the incidence of indirect taxes on products and services.
  • Notifications:
    • Central Excise Circular No.860/18/2007-CX dt. 22nd Nov/07 : Regarding Self-sealing of exports goods.
  • FDI in cable TV set to touch 74% : The government is all set to allow 74% foreign direct investment (FDI) in cable services and head-end in the sky (HITS) – a satellite-based system to distribute TV signals via cable – while also permitting 100% FDI in downlinking of general and entertainment channels uplinked from abroad. The move will eventually intensify competition in the telecom sector, particularly when convergence of telecast distribution, telecom and broadband becomes a reality.
  • Notifications:
    • Central Excise Notification No.39/2007 (N.T.) dt. 13th Nov/07: Amending the CENVAT Credit Rules, 2004, adding a provision after the second proviso, in rule 3, sub-rule (5).
  • Supreme Court cancels extra duty on Laptops : In a recent judgment, the Supreme Court has held that the government cannot levy an additional 7% customs duty on Notebook PCs (laptops) as in the case of desktop computers, since the two are totally different though capable of performing similar functions. Notebook PC being an integrated item cannot be a set of a CPU with monitor, mouse and key board.
  • Exporters won’t need multiple accounts to get drawback : In a meeting on e-commerce convened by the Department of Commerce on 5th Nov/07, which was attended by exporters and representatives from other departments and ministries concerned, the government is understood to have agreed to do away with rules requiring exporters to open bank accounts at every port or airport from which they export in order to obtain input tax reimbursements under the drawback scheme. Accordingly, they would now be required to open just one account with a nodal bank, nominated by the Customs Department, where the drawback payments for all exports made by them from various locations would be credited.
  • RBI announces mid-term Monetary Policy on 30th Oct/07 with GDP growth at 8.5% : The Reserve Bank of India, on 30th Oct/07, announced its mid-term Monetary Policy, with its GDP growth projection unchanged at 8.5%. Major measures announced include an increase in Cash Reserve Ration by 0.5% to 7.5%, Corporates allowed to write currency options, Financing of RRBs to invest in IT & Communications, RBI to provide IT support to cooperative banks etc.
  • Notifications:
    • Custosm Circular No.41/2007 dt. 29th Oct/07 – Regarding instructions for implementation of Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007.
    • Public Notice No.74(RE-2007)/2004-2009 dt. 24th Oct/07: Regarding Guidelines for conversion of DTA unit into EOU/EHTP/STP/BTP unit and attaching Appendix 14-1-O, as Annexure to the Public Notice.
  • DoT makes it tougher for cos to get spectrum : The Department of Telecom (DoT) on 20th Oct/07 announced a set of rules for granting telecom licences and allocating spectrum that is likely to impact GSM technology service providers like Bharti Airtel, Vodafone Essar etc. DoT’s new policy accepts the recommendations of the TRAI on enhancing the minimum number of subscribers required by existing operators to qualify for additional spectrum. However, the final norms in this regard will be decided by DoT after it receives a report from the Telecom Engineering Centre, which is to finalise enhanced user base criteria. The policy has also delinked the unified access service licence (UASL) from spectrum allocation.
  • New Hardware Policy in 3 weeks : According to a statement in the newspapers on 13th Oct/07 by the Addl Secretary, DIT, Mr. M. Madhavan Nambiar, the Centre is revising the hardware manufacturing policy to synergise it with the national semiconductor policy. The new policy, which is likely to be announced in 2-3 weeks, would cover all aspects, including tariffs, R&D and incentives, keeping in mind the package announced for the semiconductor industry announced earlier this year. Stating that infrastructure was a crucial input in attracting investments to these sectors, Mr. Nambiar said the Centre was keen on promoting Information Technology Investment Regions, spread over 50 to 60 km radius. The regions, to be developed in collaboration with the States, will have world-class infrastructure.
  • Telecom Sector to get dedicated satellite : The Telecom Commission has approved DOT’s proposal to have an independent, dedicated satellite for telecom services. The project, which is estimated to cost $500 million, is likely to be awarded to ISRO. DOT has been asked to work out the finer details of developing the satellite, which will largely cater to BSNL which has been entrusted with the task of executing most of the government’s rural programmes.
  • Notifications:
    • Customs Circulars No.37 & 38/2007 dt. 9th Oct/07 : Customs Valuation (Determination of value of export goods) Rules, 2007 – Instructions Reg.
    • Customs Circular No.39/2007 dt. 9th Oct/07 – Regarding exemption from filing supplementary claim in respect of increase in drawback rates with retrospective effect from 1.4.2007.
    • Notification No.36(RE 2007)/2004-2009 dt. 8th Oct, 2007 : Amending paragraph 5.4(i) related to Export obligation under EPCG scheme by the following clause : “Export obligation shall be fulfilled by export of goods manufactured/services rendered by the applicant. Export obligation under the scheme shall be, over and above, the average level of exports achieved by him in the preceding three licensing years for the same and similar products within the overall export obligation period, including extended period, if any, except for categories mentioned in paragraph 5.7.6 of Handbook of Procedures, Vol.I. Such average would be the arithmetic mean of export performance in last three years for the same and similar products.
  • Exporters to get additional duty drawback sans fresh paperwork : In a move that will expedite payment of pending drawback amount to exporters, the Finance Ministry is reported to have agreed to provide additional duty drawback announced in June 2007 without insisting on submission of fresh documents. Revenue Department would not insist on supplementary documents in case of shipments cleared through electronic data interchange (EDI) system and use EDI database data for additional entitlement calculation. In the case of non-EDI shipping bills, exporters may still have to submit papers.
  • Notifications:
    • Public Notice No.56(RE-2007)/2004-2009 dt. 1st Oct/07 : Amendments in Handbook of Procedures, V.I, paragraph 4.46 related to “Time period” for filing DEPB application.
    • Public Notice No.54(RE-2007)/2004-2009 dt. 1st Oct/07 : Amendments in Handbook of Procedures, V.I, paragraphs 5.3.1, 5.3.2, 5.8 (related to ‘Fulfillment of Export Obligation’), 5.8.1, 5.8.2, and 5.8.3
    • Policy Circular No.13(RE-07/2004-2009 dt. 1st Oct/07 : Clarification on the availability of benefit of DFIA scheme for physical exports to RPA countries, as per paragraph 4.1.6 of FTP.
    • Policy Circular No.12(RE-07/2004-2009 dt. 1st Oct/07 : Clarification on the facility of Export Promotion Schemes administered by DGFT.
  • Single-window clearance for IT Hardware manufacturers : According to a statement by Department of Information Technology (DIT), the government is considering a proposal to allow single window clearance at the Centre, State and Municipal level for electronics and IT hardware manufacturers, a move that is expected to induce more investments in the sector. The proposal initiated by DIT has got a strong support from the task force on promoting growth of electronics and IT hardware industries headed by the Principal Secretary to the Prime Minister. DIT is in consultation with the Commerce and Finance Ministries for chalking out the final cource of action. The proposals include procedural simplification for setting up a unit, approval based on self declaration, import and export facilitation and infrastructure support for the sector. The move is saimed towards attracting multi-billion dollar investment in the IT hardware manufacturing sector, which, according to industry estimates, is expected to become a $155-billion industry in the next couple of decades from $43 billion now. The figure is exclusive of the consumer electronics sector which contribute about 35% of the total electronics hardware production in India and Colour TVs are the largest contributor to this sector.
  • New Finance Panel to draw GST road map : The government has clearly signaled its commitment to bring in a Goods & Services Tax (GST) at the Centre and states by 2010. It has decided to mandate the 13th Finance Commission to prepare a road map for the introduction of GST. The Panel, to be appointed soon, is expected to give its award by the middle of 2009
  • Notifications:
    • Public Notice No.53(RE-2007)/2004-2009 dt. 27th Sept/07 : Deleting Condition for fulfillment of Export Obligation under EPCG Scheme (Paragraphs 5.7.8 and 5.8.6 in the Handbook of Procedures, Vol.1)
  • DIT pushes for tax sops to IT firms : In what may bring some cheer to infotech companies, the Department of Information Technology (DIT) has begun the process of seeking Capbinet approval for extending tax benefits for the sector beyond April, 2009. The benefits are available to EOUs and STPIs and expire on 31st March, 2009.
  • No easy entry for cheap optical discs : Directorate of Anti-dumping & Allied Duties under Ministry of Commerce plans to expand the scope of anti-dumping duty on imported optical discs by making it applicable to imports from five more countries, namely Malaysia, Korea, Thailand, UAE and Vietname. Earlier, the government had imposed anti-dumping duties ranging from Rs.2.24 per unit to Rs.4.20 per unit on import of compact discs recordable (CD-R) from China, Hong Kong, Singapore and Taiwan. The move is expected to help Indian CD manufacturers (like Moser Baer) expand their production capacities over the next year, and would also spur investment in manufacturing of related IT peripherals such as mouse, keyboards snd speakers.
  • Fresh DOT guidelines for screening licence applications : The Department of Telecommunications (DOT) has decided to set up a Committee to lay down guidelines for scrutiny of companies seeking unified assess service licence (UASL). The guidelines are expected to be ready in the next ten days. The DOT has fixed October 01 as the deadline for applying for UAS licence
  • Guidelines for the Semiconductor Policy issued : The Government on 14th Sept/07 issued guidelines for the semiconductor manufacturing policy, which will enable companies to roll out their investment plans. The guidelines define fab unit, eco-system unit, state-of-the-art technology, net present value (NPV), financial closure, capital expenditure and threshold limit for companies to apply for the special incentive package. Under the package, a company investing $550 million for a fab unit and $220 million for other products such as micro and nanotechnology products, will be eligible for incentives upto 20% of capital expenditure during the first 10 years if unit is in an SEZ and 25% if it is located outside an SEZ. To avail the sops, investors would have to submit proposals, along with a feasibility report, to an appraisal committee, chaired by the Additional Secretary in DIT, after paying an non-refundable application fee of Rs.25 lakh. According to the guidelines, only technologically sound projects would be eligible for the package and investors who can attract further upstream or downstream investments would be encourages. Investments made before the date of receipt of applications and investment in land made more than six months before the date of receipt of application shall not be considered for calculation of capital expenditure. While the appraisal committee would, on the basis of the material and advice available on record, make recommendations to the Central government, approval of the project under the package would vest with the government.

    Companies planning fab plants (factories to produce raw silicon wafers with chips) for the electronics industry and solar photovoltaics (for solar energy generation) projects can now formally apply for concessions under the policy. As per the guidelines now issued, companies like SemIndia, HSMC, Signet Solar and Moser Baer etc. are going ahead with their investment plans already announced. According to IT advisory firm Gartner, the total electronic equipment production in India will reach $32 billion in 2011, compared with $14 billion in 2006, a CAGR of 18%. Semiconductor consumption in India will more than double from $2.8 billion in 2006 to $7.2 billion in 2011.

  • Duty-free scrips may replace DEPB : In a move that could boost profitability of exporters, the government is considering issue of duty-free scrips to offset various state-level taxes. The levies include sales tax on petroleum products, CST, electricity duty, octroi, mandi fees, purchase tax, development tax and toll tax. The Commerce Ministry, in a Cabinet note on the proposed replacement for DEPB scheme, has also recommended that the education cess and similar levies should also be neutralized through the proposed duty-free scrips, which can be used by exporters to pay customs duty on imported inputs. Exporters could save up to 4% of the value of their exports through the new instrument and this would provide a much-needed boost at a time when the rising rupee has made competition stiffer in the global markets. The drawback scheme currently offers cash reimbursement to exporters for taxes paid by them to the Centre, such as Customs or Excise. The Commerce Ministry feels a constitutional amendment should be carried out to facilitate reimbursement of state-level taxes. Then the DEPB scheme could be wound up, introduce duty free scrips and drawback could function as a single window facility. The new system, if cleared, would be in operation till March 2010. If GST is introduced by 2010, there will be no need to reimburse state taxes separately.
  • Finance Ministry brings down customs duty on LCD Monitors and Digital cameras by changing classification: A change in classification of gadgets and comper peripherals by the government will make digital cameras and LCD monitors cheaper by at least 10%. The Finance Ministry has issued a circular, relenting to the long demand of the IT industry, to classify LCD monitors as "Computer Monitors" (rather than TV) and Digital Cameras as "Still Image Cameras" (rather than Video Camcorders). It will bring down the customs duty on these products from 10% to zero. LCD Monitors were earlier classified as LCD TVs, which attracted a 10% customs duty in contrast to LCD Monitors which attract zero customs duty. A 16% excise/CVD, however, remains common across both products.
  • Govt allows duty refund of 4% additional customs duty on electronics : The Finance Ministry has notified a scheme to refund the 4% additional customs duty paid on imported goods like electronic items, which is expected to make such imports cheaper. Trades who import goods for sale have to pay both sales tax and the additional duty, a sort of double taxation. Prior to this, the effective tax liability, including basic customs duty on imported goods, was around 34%. The Finance Ministry has now said that traders/importers will get a refund for the 4% duty paid with effect from 14th Sept/07, after submission of necessary documents like proof of payment of sales tax/VAT/invoices of the sale of imported goods etc.
  • Fresh customs valuation norms in step with WTO : Reflecting changes in the international economic scenario, the Finance Ministry on 14th Sept/07 notified the new customs valuation norms. The new rules, which will be used to calculate the customs duty on for both imported and exported goods, are coppletely different from the existing provisions and have introduced varied valuation norms for various kinds of imports and exports. These rules will replace existing provisions of 1988 and comes into force from 10th oct, 2007.
  • Notifications:
    • Notification No.102/2007-Customs dt. 14th Sept/07 : Regarding exemption of additional customs duty
    • Notification No.35/2007-Central Excise (N.T.) dt. 14th Sept/07 &
    • Notification No.36/2007-Central Excise (N.T.) dt. 14th Sept/07 : regarding Amendments in Cenvat Credit Rules 2004
    • Notification No.95/2007-Customs (N.T.) dt 13th Sept, 2007 : Regarding the Customs Valuation (Determination of Value of Export Goods) Rules, 2007.
    • Notification No.94/2007-Customs (N.T.) dt 13th Sept, 2007 : Regarding the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
    • Customs Circular No.32/2007 dt. 10th Sept/07 - Classification of Digital Still Image Video Camera
    • Customs Circular No.33/2007 dt. 10th Sept/07 - Classification of Digital LCD/Flat Panel Monitor
    • Notification No.27(RE-2007)/2004-2009 dt. 7th Sept/07 - Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) export of which is regulated
  • ESC seeks extension of tax sops beyond March 2009 : In an attempt to help the small and medium enterprises, the Electronic and Software Export Promotion Council (ESC) is lobbying for extension of tax sops beyond March 2009. According to Mr. Sanjiv Narayan, Chairman, ESC, about 12,000 SMEs in software and electronic hardware sectors will be impacted with the impeding removal of tax sops for STPI registered firms in March 2009. Mr. Narayan further said that withdrawal of tax benefits under Section 10A and 10B will affect the headstart that Indian companies have gained especially the SMEs. ESC wants sops to be extended for at least five years.
  • Semiconductor Policy guidelines to be announced soon : According to a source in the Ministry of IT, the much awaited guidelines on the semiconductor policy, expected to bring in investment worth billions of dollars, is likely to be announced soon. The guidelines would help Intel, Siemens, Texas, Videcon, Moser Baer and others to firm up their plans to set up semiconductor manufacturing facilities in India.
  • Notifications:
    • Customs Circular No.31/2007 dt. 29th Aug/07 : Issues concerning Import & Export through Courier Mode
    • Customs Circular No.26/2007 dt. 20th July/07 : Waiver of interest on goods cleared from a warehouse when duty is paid by way of debite in DEPB licenses.
  • Finance Ministry may make extra duty drawback automatic : Exporters hit by the appreciating rupee may not have to file supplementary claims to get the additional benefit of the increase in duty drawback rates. The Finance Ministry is likely to disburse the benefits through an automatic mechanism, a move that will save time and reduce transaction costs for exporters.
  • DEPB rate hike to be reviewed : The hike in the DEPB scheme announced by the Commerce Ministry in July 2007, is being reviewed after stiff opposition by the Finance Ministry. The review is to be completed in three weeks.
  • Mixed bag in TRAI review of telecom licensing norms : In a comprehensive review of telecom licensing norms aimed at dismantling barriers to competition, the Telecom Regulatory Authority of India (TRAI) on 29th Aug/07 suggested the following:
    • Licensee to be allowed to acquire 20% stake in rival operator within the same circle
    • Removal of the current 15 MHz spectrum cap on the merged entity
    • Number of telecom service providers in a circle left uncapped
    • Clearance upto 10% acquisition automatic, beyond that on case-by-case basis
    • Combined market share of merged entity to be 40%, down from present 67%
    • Operators to pay one time charge for additional spectrum beyond 10 MHz
  • Notifications:
    • Policy Circular No.04 (RE-2007)/2004-09 dt. 16th Aug/07 : Transitional Arrangements under Para 1.5 of Foreign Trade Policy, 2004-2009.
  • TRAI to dial for unlimited mobile players : In its next stage of licensing reforms, which will determine the future of Indian telecom, the Telecom Regulatory Authority of India (TRAI) is set to recommend removal of cap on the number of players, allowing both CDMA and GSM services under the same licence, and easing of merger and acquisition norms. TRAI's recommendations may come under severe criticism from the GSM players and will further open up the world's most competitive telecom sector
  • Duty on ICs chipped to zero to check Chinese imports : Through notification dated 8th Aug/07, the government, in a damage control exercise, has reduced the duty on ICs from 4% to zero. With a high central value added tax (Cenvat) overflow, most motherboard manufacturers in India had started importing motherboards from China and stopped manufacturing them in India. The notification aims to stop that. ICs are used in every electronic device - TVs, mobile chipsets, PC motherboards, TV set top boxes, modems etc. and make about 55-70% of the manufacturing cost of these items.
  • Notifications:
    • Notification No.93/2007-Customs dated 8th August, 2007 : Exempting ICs from 4% additional duty.
  • FICCI seeks more sops for exporters : Concerned about the recent slowdown in exports, FICCI has sought enhanced relief package for exporters to counter the impact of rupee appreciation. The package proposes inclusion of more products for relief, enhancing duty drawback/DEPB rates from 3% to 5%, reducing interest on export credit to below 5%, increasing value caps, allowing conversion of shipping bills, announcing a package for EOUs against free shipping bills and income tax incentive for exporters.
  • Notifications:
    • Central Excise Notification No.31/2007 (N.T.) dt. 2nd August, 2007 : Notifying conditions, ssafeguards and procedures for supply of items like tags, labels, printed tags, stickers, belts, buttons and hangers (referred as "specified goods") produced or manufactured in EOUs and cleared without payment of duty to a unit in DTA for use in the manufacture or processing of goods which are exported in terms of Para 6.9 (h) of FTP 2004-09.
  • RBI announced first quarter review of its Monetary Policy 2007-08 : Unveiling the first quarter of its Monetary Policy for 2007-08 on 31st July/07, RBI kept key rates unchanged, but hiked bank's cash reserve ratio (CRR) by 50 basis points at 7% and removed the Rs.3,000-crore cap it had on daily reverse repos under its liquidity adjustment facility. Both the operations rates - the repo and reverse repo - kept unchanged at 7.75% and 6% respectively. The measures announced by the RBI Governor were aimed to manage the excess liquidity in the system and keep inflation in check.
  • Notifications:
    • Customs Notification No.90/2007 dt. 26th July, 2007 : Exempting goods covered under Chapters 84, 85 etc. for the manufacture of All semiconductors, LCDs,OLED,PDP, storage devices, solar cells, photovoltatics etc. from the whole of additional duty of customs
    • Notification No.15/(RE-2007)/2004-2009 dt. 20th July, 2007 - Amendments in FTP 2004-09, para 6.2(h), regarding procurement and export of spares/components etc.
    • Public Notice No.23(RE-2007)/2004-09 dt. 20th July, 2007 : Amendments in Appendix 14-1-H of the Handbook of Procedures (Vol.1) regarding DTA sales
    • Central Excise Notification No.31/2007 dt. 19th July, 2007 : Amendment in Notification No.6/2006-Central Excise dt. 1st March, 2006, adding 'Recorded smart cards' and Recorded proximity cards and tags' to the entries after Sl.No.22.
  • New DEPB Scheme by November 2007 : During a recent CII Conference, the Director General of Foreign Trade, Mr. R.S. Gujral said that the new DEPB Scheme was likely to be out by November, 2007.
  • DEPB, Duty Drawback benefits likely for SEZs, EoUs too : Exporters in SEZs and EoUs are also likely to be given the DEPB and duty drawback benefits, given out by the government to other exporters recently, to offset the losses incurred due to the rising rupee.
  • 2G spectrum policy to be formulated in few months along with allocation plan for 3G services : According to the Department of Communications, the 2G spectrum policy will be formulated along with the spectrum pricing and allocation for 3G services. Of the 42.5 Mhz spectrum, 25 Mhz will be set aside for 3G services. The policy is expected in the next few months, around the time the defence forces vacate 42.5 Mhz of spectrum. The move is part of Communications and IT Minister A Raja's attempts to solve the spectrum issue comprehensively.
  • Notifications:
    • Notification No.68/2006-Cus (NT) dated 16.7.2007 and Customs Circular No.25/2007 dated 16th July, 2007…..Regarding All Industry Rates of Duty Drawback, 2007-08
    • Public Notice No.17(RE-2007)/2004-2009 dated 12.7.2007 and Public Notice No.18 dt. 13.7.2007 - New DEPB Rates effective from 1st April, 2007.
    • Customs Circular No.24/2007 dt. 2.7.2007 - Delay in payment of customs duty refunds.
  • Re-hit exporters get Rs.1,400 exporters get Rs.1,400 crore package : On 12th July, 2007, the government doled out a Rs.1,400 crore-a-year relief package, hit by a sharp appreciation of the rupee. The package includes interest rate relief, adjustment of duty drawback rates and reimbursement of export claims. Drawback rates have been increased on most items and some more items have been added to the list effective from 1st April, 2007, which have undergone significant changes in line with changes in the price of inputs and duties. Except the revised drawback rates, all other measures are temporary in nature to bail out exporters.
  • VAT on CFLs set to be cut to 4% : Compact Fluorescent Light (CFL) bulbs may turn cheaper soon as efforts are on to reduce the value added tax (VAT) on these energy-efficient products to 4%, a formal proposal for which may be submitted to the Group of State Finance Ministers on VAT, In several States, 12.5% VAT is charged at present, while Haryana and Punjab have already reduced the rate to 4%.
  • Notifications:
    • Customs Notification No.78/2007 dt. 29th June, 2007 : Regarding anti dumping duty on import of Compact Discs-Recordable (CD-Rs) from the People's Republic of China, Hong Kong, Singapore and Chinese Taipei.
  • Govt plans to slash custom tariffs in step with Asean rates : As a part of government's long term agenda to bring the country's customs tariffs in step with the Asean levels, it plans to not only to cut down the present peak rate of 10%, but will also reduce duty on raw materials and intermediaries below the present rates of 5% and 7.5%. At present, India has an average industrial tariff of 9.4%, which is much higher than the Asean's average rates - 6.3% in Philippines, 6.9% in Indonesia and 8.4% in Malaysia. The cut in duty rates is likely to be accompanied by a reduction in the dispersual of duty rates as well. The move is to make the country more competitive in terms of investment and exports and also to help contain inflation if and when it happens again.
  • Notifications:
    • Public Notice No.10(RE:2007)/2004-2009 dt. 22nd June, 2007 : Amendments in Sl.No.B-20, in respect of export item (Colour TV) and various import items (like resistors, transistors, diodes, capacitors, ferrites, PCBs, picture tubes, ICs etc).
    • Public Notice No.11(RE-2007)2004-09 dt. 22nd June, 2007 : In Appendix 4-C, under the list of agencies authorized to issue Certificate of Origin-non-preferential, under Delhi, Sl.No.2, stands amended to - APEX CHAMBER OF COMMERCE & INDUSTRY OF NCT DELHI, A-8 Naraina Industrial Area, Phase-II, New Delhi 110 028 (Tel - 011 25893646, Telefax - 011-41418461, E-mail - delhiichamber@touchtelindia.net, website - www.dcci.in.
  • Semiconductor Policy norms to be issued early July 2007 : The guidelines relating to the proposed semiconductor policy, which was notified earlier, are likely to be issued early in July 2007 with the Ministry of Communictions and IT forwarding the same to the Finance Ministry for its nod. The Ministry of IT has already set up an appraisal committee headed by the Addl Secretary of DIT. This Committee will receive expressions of interest from investors and submit its recommendations to the government for its approval.
  • Indo-Thai FTA on goods to be reality by Sept/07 : According to the Commerce Ministry, Shri Kamal Nath, talks on Indo-Thai FTA on goods will start in July and finish by September, 2007. The two countries are on track to conclude an FTA in the near future to establish the FTA covering trade in goods by 2010.
  • Drawback, DEPB rates may be hiked to help exporters : The Finance Ministry is considering a suggestion by the Commerce Ministry to enhance duty neutralization rates to make up for the revenue lost by exporters due to sharp appreciation in the rupee. According to Federation of Indian Export Organisation (FIEO), the Commerce Secretary, Mr. G.K. Pillai had informed them about serious discussions initiated with the Finance Ministry and the RBI for enhancing DEPB and Drawback Rates to 4-5%. Another proposal to compensate exporters is that they may be paid interest on their export earners foreign currenty account at par with what the foreign currency non-resident holders get.
  • Framework for GST regime likely by Oct 2007 : The government is likely to come up with a framework for introducing goods and services tax (GST) mechanism by October 2007 when the joint working group of State and Central government officials will submit their report. The panel has decided to call experts, academicians and industry chambers to discuss various models of GST and come up with suitable model.
  • TRAI paper seeks reviewal of licensing : The Telecom Regulatory Authority of India (TRAI) has released a consultation paper seeking the industry's view on reviewing existing licensing conditions and capping the number of service providers per circle. According to this consultation paper. According to the paper, TRAI has hinted on the need to limit the number of operators per circle. At present, TRAI provides licences based on availability of spectrum. The paper also seeks a change in the existing mergers and acquision policy. Currently, no single company can hold more than 10% in another operator in the same service area.
  • Peak Customs duty rate may fall to 6-8%: PwC : PricewaterhouseCoopers expects India's peak Customs duty rate to fall to 6-8% in the near future as the country goes ahead with its plan to bring down tariff to Asian levels.
  • VAT in Puducherry from July 01, 2007 : Puducherry government on 2nd June/07 promulgated an ordinance bringing into force Value Added Tax from July 01, 2007.
  • UP likely to end trade isolation, roll out VAT : Uttar Pradesh, the only state not to have implemented VAT, may soon end its trade isolation under the new Mayawati dispensation. According to the top sources in the CM's office, the State may soon come up with an official announcement for implementing VAT
  • FDI Policy review to be over by July/07 : According to a recent statement by Mr. Ajay Dua, Secretary, Department of Industrial Policy and Promotion (DIPP), the Foreign Direct Investment (FDI) policy review is currently under way and would be completed and announced by July 2007. The results of the FDI review would be in the direction of liberalization. Mr. Dua outlined the growing attraction of India as an investment destination and identified six sectors with potential which includes IT and ITeS Services, Telecommunications, Automobiles/Auto Ancillaries, among others
  • Notifications:
    • Notification No.6(RE-2007)/20042009 dt. 23rd May/07 : Amending FTP 2004-09, to enable shipments from non-EDI enabled ports to be also eligible for benefits under Focus Product Scheme and Focus Market Scheme.
    • Customs Notification No.72/2007 dt. 21st May/07 : Amendments in various Customs Notification Nos.92/2004, 97/2004, 41/2005, 90/2006 and 91/2006.
  • Duty-free imports under Target Plus tightened : Through a recent circular, CBEC has specified the norms for duty free import of products under the Target Plus Scheme (TPS), and has tightened the norms by allowing exporters to import only goods that will be used as an input for manufacturing of the exported goods. Under TPS, exporters are entitled to rewards in the form of duty free credit based on incremental exports.
  • Notifications:
    • Customs Circular No.21/2007 dt. 8th May/07 : Clarification regarding scope and coverage of goods imported under Target Plus Scheme.
  • DOT mulls cap on cell operators : The Department of Telecommunications (DOT) is contemplating applying a cap on the number of mobile operators in each service area (circles) to ensure that adequate spectrum can be made available to all current licencees so that they can expand services and maintain quality of service. The ceiling will differ from circle to circle, depending on the viability of the number of operators in the circle. Currently, India does not limit the number of operators in a circle and upto 8 operators offers services in each of the 23 circles in the country.
  • Notifications:
    • Customs Notification No.47/2007-NT dated 8th May, 2007 : Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007.
    • Customs Circular No.18/2007 dt. 24th April/07 : Grant of waiver of the requirement of Bank Guarantee in respect of imported goods to be warehoused in Public or Private Bonded Warehouses.
  • DOT sets up panels to oversee FDI in telecom sector : The Department of Telecommunications has constituted two committees to oversee implementation of foreign direct investment (FDI) in the telecom sector by the companies, especially with regard to the guidelines concerning security aspects. Recently, the government notified the revised guidelines for telecom companies willing to hike FDI from 49% to 74%. One Committee has been set up under the Chairmanship of DoT's Additional Secretary, Mr. R. Bandyopadhyay to monitor compliance of the Cabinet decision by various agencies on a quarterly basis.
  • Notifications:
    • Central Excise Circular No.851/9/2007-CX dt. 3rd May/07 : Procedure governing the movement of indigenous goods from a factory of manufacture or warehouse to a unit set up/STP under EOU/EHTP/BTP scheme.
    • Customs Circular No.19/2007 dt. 3rd May/07 : Warehousing of goods imported and/or procedured indigenously by EOU/EHTP/STP/BTP units.
  • Govt withdraws Notification; GPRS Mobiles to attract 4% customs duty : The Central Board of Excise & Customs (CBEC) has gone back on a move to classify GPRS mobile phones as radio navigational apparatus (better known as satellite phones) for tax purposes. This means GPRS phones will attract a 4% customs duty rather than 34% applicable on satellite phones. The move comes as major relief to mobile phone and PDA manufacturers like Nokia, Samsung, Backberry, Motorola etc.
  • Salient features of RBI's Annual Policy for 2007-08 : After five increases in the past year, the Reserve Bank of India, in its Annual Policy announced on 24th April, 2007, kept the interest rates unchanged and chose to encourage more foreign exchange outflows and stem the threat of inflows in its fight against inflation. With the new measures, RBI has forecast economic growth at around 8.5 per cent for 2007-08. The special features are :
    • Repo, Reverse Repo, Bank Rate, CRR unchanged
    • Risk weight on home loans upto Rs.20 lakhs reduced to 50% from 75%.
    • NRI deposits interest cap lowered 50 bps
    • Firms' overseas investment limit enhanced to 300% of net worth from 200%
    • Listed Indian firms' portfolio investment limit in listed overseas firms raised to 35% of net worth from 25%.
    • Banks allowed to lend to overseas step-down subsidiaries of Indian companies
    • Mutual Funds' overseas investment limit raised to $4 billion from $3 billion
    • Individual overseas investment limit doubled to $100,000
  • Notifications:
    • Notification No.01/2007 dt. 19th April, 2007 : Notifying the Foreign Trade Policy 2004-2009 incorporating the Annual Supplement as updated on 19th April, 2007. The policy shall come into effect w.e.f. 1st April, 2007.
    • Customs Circular No.17/2007 dt. 19th April, 2007 : Clarification in respect of classification of higher technology featured mobile/cellular handset or telephones.
    • Customs Circular No.16/2007 dt. 18th April, 2007 : Regarding Inter Unit Transfer of Capital Goods from one EOU/STP/EHTP unit to another EOU/STP/EHTP unit
    • Notification No.57(RE-2006)/2004-2009 dt. 13th April, 2007 : Amending para (vi) of "Nature of Restriction" against Sl.No.147 of Chappter 44 of ITC of Foreign Trade Policy 2004-2009, to effect the exports within a period of 12 months from the date of import.
  • Annual Supplement for 2007-08 to FTP announced; Commerce Minister eyes $200 billion from exports by 2008-09 : The Commerce & Industry Minister, Mr. Kamal Nath, unveiling the Annual Supplement for 2007-08 to the Foreign Trade Policy 2004-09 on 19th April, 2007, set an export target of $160 Billion for the current fiscal 2007-08, a 28% increase over last year's $124.63 billion, with a projected export target of $200 billion during 2008-09. India's share in world trade is now over 1%. Some of the salient features announced by the Minister:-
    • Service Tax exemption to exporters
    • Export duty benefit schemes extended to SEZs
    • Focus Products, Focus Market Schemes expanded
    • DEPB Scheme extended to 31st March, 2008
    • New export promotion scheme launched for high-tech products
    • Export obligations under EPCG scheme eased
  • Notifications:
    • Notification No.3(1)/2007-IPHW (SIPS) dated 21st March, 2007 issued by DIT : Notifying Special Incentive Package Scheme to encourage investments for setting up Semiconductor Fabrication.
    • CBEC Circular No.15/2007-Customs dated 20-3-2007 : Covering all large tax payer EOUs (Export Oriented Units) under the control of Large Taxpayer Units (LTUs), which have been created to service large taxpayers paying excise duty and corportate tax/income tax/service tax etc. under a single window.
  • 3G Spectrum Policy likely by month-end : With the Defence Ministry agreeing to vacate 40 Mhz spectrum by July/07, the DOT Secretary, Mr. D.S. Mathur has stated that the much-awated 3G Spectrum Policy may be announced by the end of April, 2007.
  • CST cut from 1st April notified : The Central Government on 29th March/07 notified reduction in the Central Sales Tax (CST) from 4% to 3% effective from 1st April, 2007.
  • DEPB scheme likely to be extended : According to newspaper reports, while the Finance Ministry has agreed to extend the DEPB scheme by only one year, the Ministry of Commerce is hopeful that the existing scheme will be allowed to continue for the next three years after which it will be easier to replace as the common goods and services tax (GST) will be in place by 2010.
  • IT Minister for tariff cut on Computers : The Union IT Minister, Mr. Dayanidhi Maran, has taken up the case for reduction of tariffs on computers with the PM and FM to enable higher investment flows to the sector. This follows the meeting the Dell CEO had with the Minister last week on the issue. The IT Ministry is reported to have represented for scrapping duties on computers to give it the same status as cellular phones.
  • VAT rates may go up to absorb 2% CST cut impact : The planned 2% cut in Central Sales Tax (CST) from 2008-09 may be set off by a 1% increase in the value added tax (VAT). Based on a proposal made by the Empowered Committee on VAT, the Finance Ministry is likely to increase VAT to 5% on items that are currently taxed at 4%.
  • Semiconductor Policy notified : The Union Government on 22nd March/07 notified the semiconductor policy it had announced on 22nd Feb/07.. With this, it expects to attract an investment of $6-10 billion (Rs.24,000-44,000 crore) by luring two or three fabrication units, with an investment worth $2-3 billion each, by 2010. According to the IT Minister, an Appraisal Committee to be headed by an Additional Secretary in DIT, will be formed soon to receive expression of interest from interested parties and submit its recommendations to the government. Projects already announced include SemIndia ($3 Bn), Moser Baer & Videcon ($250 Mn each), Freecale Semiconductor & Cypress Semiconductor ($50 Mn each). The domestic market for electronic goods is expected to reach $363 billion by 2015 and the domestic demand for semiconductors alone is predicted to touch $43 billion.
  • Union Cabinet approves Telecom FDI norms : On 22nd March, 2007, the Union Cabinet finally approved a revised set of guidelines for telecom companies to qualify for raising foreign direct investment up to 74%. The norms were first notified in Nov. 2005 and telecom firms were allowed (Press Note 5) to raise FDI to 74% from the earlier 49%, the conditions governing eligibility were put in abeyance as the industry considered them too harsh. The latest approval allows telecom companies to appoint foreign citizens in senior management positions, subject to security clearance from the Home Ministry to be renewed every year. The Chief Officer in charge of technical network operations and the Chief Security Officer would, however, have to be resident Indians. Remote access to networks in India would also be permitted from approved locations.
  • Cabinet approves chip design facility at SCL : The Union Cabinet at its meeting on 15th March, 2007 gave approval to upgrade the very large scale integrated circuit (chip design) facility at Semiconductor Complex Ltd at a cost of Rs.486 crore.
  • Inverted duty structure arisen from the current budget in for correction : During a recent CII Seminar oganised by CII, the Revenue Secretary has committed to correcting inverted duty structures that may have arisen in the Union Budget for 2007-08.
  • GST likely to be levied at 20%, road map soon : The government is set to unveil a road map for a national level goods and service tax (GST) in the coming fiscal. The Finance Ministry is also considering levying the GST at about 20%.
  • Notifications:
    • Budget Notifications :
      • Customs Notifications:
        • No. 19/2007-Customs dt. 27th February 2007 (Amendment in Notification no.45/2005-Customs dt.16th May 2005 read with notification No. 16/2007-Customs dated 21st February, 2007)
        • No.26/2007-CUSTOMS dt. 1st March 2007 (Amendment to Notification No. 25/2005)
      • Central Excise Notifications:
        • No.8/2007-Central Excise dt. 1st March 2007 (Small Scale Exemption)
        • No.8/2007- Central Excise (N.T.) dt. 1st March 2007 (Amendments to CE Rules, 2002)
        • No.9/2007- Central Excise (N.T.) dt. 1st March 2007 (New Rule 10A inserted in Central Excise Valuation Rules, 2000)
        • No.10/2007- Central Excise (N.T.) dt. 1st March 2007 (Amendments to Cenvat Credit Rules, 2004)
      • Service Tax Notification No.4/2007- Service Tax dt. 1st March 2007 (Increase in threshold limit of service tax exemption for small service providers)
  • The 2007-08 Budget is lack-lustre and belies expectations of Electronics Hardware : Details on the general and sector specific indirect and direct tax changes proposed in the Union Budget 2007-08:

    General

    • GDP Growth rate increases to 9.2% (estimate) compared to 9.0 % in 2005-06
    • Avg growth rate in last 3 years is 8.6%
    • Growth in Manufacturing Sector accelerated from 9.1% in 2005-06 to 11.3% in 2006-07.
    • Growth in Services sector from 9.8% to 11.2%
    • Heavy emphasis on Education, Health and inclusive growth
    • Concern about inflation and slow growth of agricultural output
    • Income Tax (Sec 35(2AB)) support to in-house R&D extended by 5 years
    • CST reduced to 3% wef 1-4-07 and re-confirmation of movement towards a consolidated GST by 2010.
    • Addl 1% Secondary Education Cess levied on Customs, Excise and Service tax
    • No mention of Semiconductor Policy or Electronics Hardware

    Customs Tariff (CT) & Excise Duty (ED) Highlights
    General
    Customs

    • Peak rate of customs duty on non-agricultural products reduced from 12.5% to 10%
    • Cellphone parts, components and accessories exemption from ACD extended till 30.06.2009
    • Customs duty has been reduced from 20% to 10% on seconds and defectives of iron and steel.
    • Customs duty has been reduced from 12.5% to 7.5% on most plastics and chemicals:
      • Goods Falling under Chapter 28 (except Titanium Dioxide),
      • Goods Falling under Chapter 29 (except Mannitol, Sorbitol and Caprolactum)
      • Goods Falling under Chapter 31,
      • Goods Falling under headings 3201 to 3207 (except pigments and preparations based on Titanium Dioxide)
      • Goods Falling under heading 3403
      • Goods Falling under headings 3801 to 3807 and 3809 (with few exceptions), 3810, 3812, 3816, 3821 and 3824 (except 3824 60)
      • Goods Falling under headings 3901 to 3907 and 3909 to 3915
    • Customs duty has been reduced from 12.5% to 10% on Titanium Dioxide, and pigments and preparations based on Titanium Dioxide.
    • R&D: Present concessional rate of 5% customs duty plus Nil CVD on specified items, available to public funded research institutions and non-commercial research institutions, has been extended to all research institutions registered with the Department of Scientific & Industrial Research.
    • The following reductions have been effected on Customs duties
      • High ash coking coal from 5% to Nil
      • Butyl rubber from 10% to 5%
      • Borax or boric acid from 10% to 5%
      • Frit from 10% to 5%
      • Watch dials and movements from 12.5% to 5%
    • Additional Secondary and Higher Education Cess: of 1% of the total duties of customs has been imposed on imported goods. The proceeds from this cess shall be utilized to finance secondary and higher education.
    • Withdrawal of exemptions: Some of the items on which customs duty exemptions/concessions have been withdrawn are
      • Recorded magnetic tapes for producing TV serials
      • Specified goods like TV cameras (professional grade), audio recording equipment, tabletop desk publication video machine, 8 channel video mixer/switches, etc.

    Amendments to the Customs Act, 1962
    Valuation Provisions

    • Section 14 is proposed to be substituted. Sub-section (1) provides that the value of the imported goods and export goods shall be the transaction value, as determined in accordance with the Valuation Rules. The proviso thereto provides that the transaction value shall include in addition to the price actually paid or payable, any amount that the buyer is liable to pay for costs and services, including commissions and brokerage, assists, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance and handling charges. Sub-section (2) is a nonobstante clause and provides for fixation of tariff values for any class of imported or export goods, while having regard to the trend or value of such or like goods. Subsection (3) provides that if there is no sale of imported or export goods, or where the transaction value cannot be determined, the Valuation Rules will apply.
    • In terms of the earlier Section 14(1), the valuation of goods was based on the concept of "deemed value" and in terms of sub-section (1A) the valuation of goods was based on the concept of "transaction value". The above amendment has been proposed to remove the contradiction between the two sub-sections.
    • By way of the proposed amendment to Section 14 of the Act, it is the transaction value alone which will now be relevant for the purposes of valuation and not the deemed value of the goods

    Central Excise

    • A 1% Secondary and Higher Education Cess has been imposed on excisable goods manufactured in India. The credit of this Education Cess paid on inputs and capital goods shall be available as credit for payment of Education Cesses on the final products.
    • Small Scale Industries: Exemption limit for SSI scheme has been increased from Rs.1 crore to Rs.1.5 crore. This will be effective from 1.4.2007
    • Information Technology:
      • 'USB Flash memory' is exempt from excise duty. The exemption has been extended to 'flash memory' in general.
      • 'DVD drive' is exempt from excise duty. The exemption has been extended to 'DVD drive/DVD writer'
    • Retail Sale Price (RSP) Based Assessment is being extended from a date to be notified to:
      • Personal computers (including laptops and other portable computers)
      • Printers, whether or not combined with the functions of copying or facsimile transmission
      • Monitors of a kind used solely or principally in an automatic data processing machine
      • Computer key boards
      • Scanners
      • Computer mouse
      • Computer plotter
      • Facsimile machines
      • Modems (modulators-demodulators)
      • Set top boxes for gaining access to internet
      • Set top boxes for television sets
    • Withdrawal of Exemptions
      Excise duty exemptions/concessions withdrawn on Recorded video cassettes intended for television broadcasting supplied in different formats.
    • CVD/Excise duty exemption withdrawn on Specified parts of set top boxes (eg Tuner, Regulator…)

    Amendment to Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000

    • New rule 10A has been inserted in the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 to provide that where goods are manufactured by a job-worker on behalf of a person (commonly known as principal manufacturer), the value for payment of excise duty would be based on the sale value at which the principal manufacturer sells the goods as against the present provision where the value is taken as cost of raw material plus the job charges.

    Amendments to Central Excise Rules, 2002

    • Rule 8 has been further amended to make electronic payment mandatory for payment of duty by all assessee who have paid excise duty of Rs.50 lakhs or in excess thereof during the preceding financial year. This will come into effect from 1st April, 2007.
    • Rule 11(2) is amended to provide that the invoice shall also contain the address of the jurisdictional Central Excise Division. This will come into effect from 1st April, 2007.
    • Rules 25 & 26 are proposed to be amended to reduce the minimum penalty amounts from the present Rs.10,000/ - to Rs.2000/ -.:

    Service Tax

    • A 1% Secondary and Higher Education Cess has been imposed on excisable goods manufactured in India. The credit of this Education Cess paid on inputs and capital goods shall be available as credit for payment of Education Cesses on the final products.
    • New services included in the ambit of service tax are:
      • Services in relation to works contract
      • Development /Supply of content for telecom services & database access/retrieval services
    • Scope of Services amended:
      • Renting of vehicles carrying > 12 passengers
      • Computer hardware engg consultancy serve under Consulting Engineers service
    • Threshold limit of services tax exemption for small service providers raised from Rs. 4 Lacs to rs. 8 Lacs annually:

    Direct tax proposals

    • Threshold limit of exemption in the case of all assessees to be increased by Rs.10,000 thus giving every assessee a relief of Rs.1,000; in the case of a women assesses, threshold limit to be increased from Rs.135,000 to Rs.145,000 and in case of a senior citizen from Rs.185,000 to Rs.195,000 giving him or her a relief of Rs.2,000;
    • Deduction in respect of medical insurance premium under section 80D to be increased to a maximum of Rs.15,000 and, in case of a senior citizen, a maximum of Rs.20,000.

    Corporate Tax Proposals

    • Minimum Alternate Tax (MAT) extended to income in respect of which deduction is claimed under sections 10A & 10B of Income Tax Act
    • Surcharge on income tax on all firms and companies with a taxable income of Rs.1 crore or less to be removed.
    • Pass-through status to be granted to venture capital funds only in respect of investments in venture capital undertakings in biotechnology; information technology relating to hardware and software development; nanotechnology.
    • An additional cess of 1% on all taxes to be levied to fund secondary education and higher education

    Relevant Notifications
    Notifications
    Customs Notifications:
    - No. 19/2007-Customs dt. 27th February 2007 (Amendment in Notification no.45/2005-Customs dt.16th May 2005 read with notification No. 16/2007-Customs dated 21st February, 2007)
    - No.26/2007-CUSTOMS dt. 1st March 2007 (Amendment to Notification No. 25/2005)

    Central Excise Notifications:
    - No.8/2007-Central Excise dt. 1st March 2007 (Small Scale Exemption)
    - No.8/2007- Central Excise (N.T.) dt. 1st March 2007 (Amendments to CE Rules, 2002)
    - No.9/2007- Central Excise (N.T.) dt. 1st March 2007 (New Rule 10A inserted in Central Excise Valuation Rules, 2000)
    - No.10/2007- Central Excise (N.T.) dt. 1st March 2007 (Amendments to Cenvat Credit Rules, 2004)

    Service Tax Notifications:
    - No.4/2007- Service Tax dt. 1st March 2007 (Increase in thr