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Budget to hit local PC manufacturing: MAIT

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DQW Bureau
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While the href="http://voicendata.ciol.com/content/news/111022701.asp">Union
Budget
2011 was by and large welcomed by the industry, few details show
that
it failed to look at some of the pain points of IT manufacturers,
especially the problem of inverted duties, double taxation on
software, etc. Manufacturers' Association
of Information Technology (MAIT), came up with a few findings and
recommended that the announcements have inadvertently exposed Indian
IT manufacturing to inverted duties that will discourage
manufacturing.

Ashwini K Aggarwal,
Executive Director, MAIT said, “As per the Union Budget for 2011,
the electronics industry will continue to pay for the Special
Additional Duty (SAD). This duty promotes imports and gives a tough
fight to the local manufacturers. I believe that the annual savings
by importing would be equal to the investments in running the
manufacturing unit.” He added, that according
to one of the conditions raised by the government, local
manufacturers could claim for refund of the SAD money, if they
achieve 44 percent value addition in their business; but achieving
that 44 percent will become more difficult. “With the new budget,
(following Annexure 1B duty) importing a PC (with Core-i3 /
g41/2gb/500 GB HDD/18.5"TFT) would save around Rs 602 per PC,”
Aggarwal said. He added, “On behalf of the industry, we have
submitted alerts to the Ministry and they are looking into the
matter. We have raised three major concerns and respective
recommendation.”

Abolish Special
Additional Duty for PC manufacturers

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  • First, SAD should be
    abolished for PC manufacturers and five percent (countervailing duty)
    CVD should be proposed on microprocessors, flash memory, RAM, and hard
    drives/combo drives.

  • Secondly, MAIT
    recommends a clarification confirming the classification of information
    technology / computer software as documents of title conveying the
    right to use information technology software under CTH 4907.00.30. This
    will ensure that the exemption under notification no.21/2002 (Sr.
    No.157) dated March 1, 2002 can be availed at the time of clearance and
    import through Customs and Service Tax paid on reverse charge basis at
    the time of remittance to the Suppliers with Service Tax being charged
    on local sale. Excise Duty reduction should benefit all printers

  • Thirdly, there should
    be a clarification on extending the benefits to all printers and not
    only the laser and inket printers.

Agreed N Sambamoorthy,
Senior GM-Sales & Marketing, Epson India, “In printer
category, the budget had reduced the Excise Duty/ CVD to five percent
and removed the SAD to nil on parts of inkjet and laser-jet printers
imported by actual users for manufacture of printers. This benefit
should have been taken for all the printers and not only a few. Local
manufactures, especially the dot matrix, line printers, thermal
printers and many more would face a major set back.” Epson is among
those
companies which have received a green signal from their headquarters
to open up a local manufacturing hub, but the local management is yet
to find any good reason for it. Sambamoorthy added, “We
have got budgets, and sanctions for opening up a local unit, but we
do not find any substantial cost savings.”

Ram N Agarwal, CEO and MD,
WeP Peripherals opined, that the budget announcement could have had
lobbying influences. He said, “Looking at the printer and imaging
market in the country, and according to reports, HP enjoys majority
share in the market followed by Canon.” There has been talks
within the industry that owing to huge investments, a few product
majors might look at consolidation of their manufacturing units
followed by the complete closure of the units. While some companies
seem
to carry different opinion. “We opened a local manufacturing unit
to stay close to the market/ customer and respond faster to its
needs. And companies operating in the SEZ/STPI zones get substantial
subsidies to operate locally,” said a spokesperson from Dell, which
has a manufacturing unit in Chennai.

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