– Industry urge government’s immideate intervention on Inverted Duty Structure

– MAIT sought clarity on the date of GST implementation

MAIT, the apex body representing India’s IT hardware, training and R&D services sectors, has come out with a recommendation document for the IT hardware industry for the upcoming Union Budget 2014. The budget is of paramount importance not only from a clear-mandate perspective where the Government can take decisive actions, but also the most anticipated policy thrust of the Narendra Modi Government setting expectations at the peak.


This direction document in the form of the budget will spell out India’s growth story and a plausible budget would help the economy steer itself by overhauling reforms and regulatory agenda.


Commenting on the upcoming Budget, Amar BabuPresident of MAIT, said “This budget marks the first litmus test propelling the development agenda; the past years have witnessed an economic downturn and a downturn of domestic growth. The Budget should address the issues curtailing investment sentiment and bring renewed optimism for sustained economic growth, conversely the government should quickly amend the policy paralysis with regards to the ease of doing business.”


Anwar Shirpurwala, Executive Director, MAIT opines, “The Hon’ble Finance Minister, Arun Jaitley should drive reforms around the ten point agenda that Mr. Modi has eloquently articulated. Recognizing the multifaceted contribution of manufacturing and electronics on a war-footing basis, the government should prioritize reforms that can navigate the challenges the manufacturing and ICT industry face every day. It should give boost to local manufacturing,early implementation of goods and service tax and credible policies to attract investments.”

Suggestions to overhaul manufacturing, electronics and ICT are as follows

–          Recommendations on Inverted Duty Structure for manufacturers of Information Technology Hardware


Plugging the lacuna with respect to Inverted Duty Structures would encourage manufacturing in India. The government should exempt SAD on all components used by  a manufacturer of IT hardware by necessitating amendments in Notification No 21/2012-Customs (T) dated March 17, 2012 and imposing necessary safeguards through specification of a condition of end use (in manufacturing/by a manufacturer) to create a level playing field


–          Recommendations on concessional rate of duty for Computers and Tablets


Reducing the rate of duty applicable on indigenous manufacture of laptops and tablets is a much-needed move to boost computer manufacturing in a country where manufacturing is disproportionate to demand. The rate could also be aligned to avoid unwarranted disputes o n the classification and treatment of goods  in terms of features as well as composition at the stage of import. This also distincts the line of commonality in a tablet and smart-phone.


MAIT also recommends that indigenously manufactured personal computers and tablets be extended concessional excise duty similar to mobile handset manufacturing in India by amending Notification no 12/2012 dated March 17, 2012 to provide for a concessional duty scheme in respect of goods classifiable under chapter 8471. An excise duty rate of 5% with CENVAT and 1% without CENVAT could be extended to personal computers and tablet computers by way of an amendment.


–          Recommendations on Dual taxation on sale of packaged or canned


We recommend a clarification to be issued with regard to software licensors involved in sale of pre-packaged software which seeks to clarify that irrespective of whether software supplied to media is electronically is accompanied by a license of otherwise, this license entails transfer of right to use goods and is outside the purview of service tax.


MAIT seems to clarify that distributors are carrying out sale of pre-packaged software without having any rights to issue licenses and therefore, transactions shall not be treated as service liable to service tax


–          Recommendations that ITA Products be included in the list of declared goods


Inconsistency in VAT rates for same goods in different states provides undue hardships for the manufacturer while calculating different rates for states. This difference in rates causes a diversion of trade discriminating free flow of trade within the country. The CST Act should be amended to specify ‘All ITA bound goods” to be ‘declared goods’ under the section 14 of the CST Act so that these goods attract uniform rate of VAT of 5% across states. This ensures that same goods are not subject to a different rate of CAT and safe-guard against diversion of trade.


–          Recommendations on Accelerated Depreciation on ITA Products


MAIT advocates that the expression ‘computer and computer peripherals’ may be replaced with the expression ‘information technology and telecommunication hardware’ in Rule 3(5A)(a)(i) of the CENVAT Rules as well as in Notification 22/2003 – CE and Notification 52/2003 – Customs. MAIT expresses hope that a comprehensive list of all ITA products and telecommunication hardware (aligned to the list of 217 ITA bound goods specified under Notification Nos 24 and 25/ 2005 – Customs both dated March 1, 2005) be notified for the benefit of accelerated depreciation in the aforesaid  Provisions/notifications.  MAIT also presses that the rate of accelerated depreciation may be revised to 10 percent per quarter or part thereof in the aforesaid provisions/notifications


–          Recommendations on Need for expeditious introduction of GST


MAIT sought clarity on the date of Implementation of GST with uniformity in procedures and documentation across the country. Also, uniformity in GST rate as well as threshold for levy across goods and services and across the centr and state laws may be published at the earliest.

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