Encouraging manufacturing in ICT sector is of strategic importance for India: MAIT
The best possible way to attract investments to India from our neighboring countries is to exempt units engaged in ICT manufacturing in the SEZs from paying MAT along with giving intra-SEZ transactions the benefits of physical exports which includes exemption from income tax, says Sabyasachi Patra, Executive Director MAIT By Sabyasachi Patra, MAIT, March 13, 2012
The Union Budget is a much awaited event as it not only directly impacts the policies, but also sends a strong signal about the Government’s focus.
In the IT manufacturing in
However, the ICT manufacturing sector in
In the IT products, the Countervailing Duty (CVD) which is equivalent to excise duty is 10.3 percent and a 4 percent Special Additional Duty (SAD) is also levied. So the total input duty on the raw materials is around 14.73 percent as against the duty payable on the finished goods of 10.3 percent. Furthermore, with the present state of value addition being to the tune of only 10-15 percent, there is a huge accumulation of Cenvat Credit which can’t be offset. So during this budget, we expect that 4 percent SAD should be abolished and all cases of inverted duty structures should be removed so as to provide a level playing field for manufacturing facilities in
A major part of the cost of manufacturing is the cost of logistics. It is a well-known fact that we have a few OEMs in the ICT sector in
The majority of the components have to be imported from
Rather than across the board reduction of the corporate tax rates the best possible way of attracting these investments to India from our neighboring countries is to exempt units engaged in ICT manufacturing in the SEZs (Special Economic Zones) from paying MAT (Minimum Alternate Tax) along with giving intra-SEZ transactions the benefits of physical exports which includes exemption from income tax. For an industry which is of strategic importance to this country, these benefits will be of immense help. Furthermore, this industry is in nascent stage, so one should not look at any notional loss of income due to these exemptions. The benefits of manufacturing industries moving into
In this sector where products are imported at zero duty under the ITA-I scheme or through the Free Trade Agreements, there is absolutely no difference between exporting and supplying to the Domestic Tariff Area. So all products under ITA-1 manufactured in the Domestic Tariff Area should be given the same benefits which accrue to physical exports such as, income tax benefits, incentives under the Focus Products Scheme etc
MAIT is also expecting the Union Budget to spur demand creation in the sector. Looking at the societal benefits of increased penetration of ICT, we expect creation of special schemes for financing the purchase of Personal Computers and laptops at concessional rate of interests. Similarly, broadband penetration will help in delivery of services like eHealth, eEducation and will help in bridging the divide between urban and rural areas. Hence schemes for subsidized broadband access will be of a big help. These schemes will also fit in nicely with the Government’s plan to lay fiber optic cables to the Panchayats.
Industry expects a stable tax regime as well as uniformity of taxation across states. There is a huge uncertainty about the implementation of GST. Large investments in manufacturing facilities are done keeping in mind a long term horizon. Speedy implementation of GST will help the industry to make investment decisions. Due to the multiplier effect of spends in IT and its societal benefits along with being big enablers in providing efficiency and productivity improvements, IT products should be provided the preferred status in GST regime.
Tax exemption and R&D Grants for the next 10 ten years should be provided to encourage the fabless semiconductor companies, which will in turn lead to creation of the ecosystem.
