Union government removes excise duty on components

Zero duty on microprocessors and storage devices

On Jan 8, the union government’s decision to reduce the excise duty on PCs
to eight percent from the earlier 16 percent was hailed by some of the major PC
vendors. But some sections of the IT industry took it with a pinch of salt, as
there was no reduct-ion on the duty of components.

But the recent announce-ment of zero excise duty on microprocessors and
storage devices–HDDs, FDDs, CD Rom drives from the earlier 16 per-cent to nil–
has brought back the smile.

Congratulating the union government (in a press release), Vinnie Mehta,
Executive Director, MAIT, said, "The government has rectified a major
anomaly that had occurred due to the recent reduction in excise duty on
computers. This reduction was limited only to finished systems and not extended
to input parts and components, which had resulted in CENVAT credit overflow for
the PC manufacturers and rendered PC manufacturing unviable."

"With the anomaly now been rectified, PC manufacturing will thrive and
PC price reduction to the order of 10-12 percent can be expected. This will also
mobilize consumption of peripherals like monitors, printers, motherboards, etc,
where there has been no excise reduction and their prices are expected to remain
at the same level. Further, the government has taken an agressive step to
facilitate migration of the grey market to the organized, by reducing the excise
duty on storage devices and microprocessors to nil," he added.

According to Kishore Jaswani, Director, Pacific Infotech, "Now, the
market is open and wide and anybody can import the components. It is also good
that the grey market will get hit and we can now gain their market share
also."

In the words of another assembler Satish Villait, Director, Bitsy Infotech,
"This will narrow down the price gap between the MNC brands and local
brands. Overall, the mini-budget is confusing."

There are others like Suresh Joshi, the newly-elected President of Pune CMDA,
who feel that a lot of the local channel players will get themselves registered
to become an excise paid firm encouraging imports into the country.

At other small cities like Ankleshwar and Bharuch, the channels are
completely confused about the situation and are wondering about the stocks lying
in their godowns.

But a major issue that’s cropping up is that now everybody is holding
stocks, according to rumor rounds in the market. Some major vendors who already
have huge stocks with them are not implementing the new excise duty as they
might end up in huge losses.

DQW News Bureau

Mumbai