The excise structure for the electronics sector is inverted at present with finished products attracting lower tariff in many cases than the components used in that product.

The duties on electronic components may be reduced to a level of 8 per cent in the forthcoming budget or at least to a level which is lower than the levy on finished products.

It is also understood that the government may extend scope of the maximum retail price (MRP)-based excise levy to cover electronic goods such as audio systems. It is further expected that the MRP-based levy may be imposed on certain durable products too. Currently, MRP-based excise is levied on colour televisions.

Finance minister Yashwant Sinha has already declared that tax slabs would be simplified and the structure rationalised in the budget for 1999-2000. This has raised the hopes of theelectronic component manufacturers.

The reduction in excise duty on components to 8 per cent from the existing levels of 13 per cent and 18 per cent will provide a booster to the component manufacturers who have been reeling under the impact of cheap imports from South East Asia and China.

The move would improve the viability component manufacturing in the country, Electronic Components Industries Association (Elcina), a body of the electronic component manufactures, pointed out.

At present, the excise levy on certain components is higher than that on the equipments. This has resulted in modified value added tax (Modvat) overflow in some cases, Elcina added.

The component manufacturers have been urging the government to reduce excise levy to a reasonable level for a few years now. However, every year, their petition had come to a nought. Currently, most components attract excise levy in the range of 15 per cent to 18 per cent, which in many cases is higher than levy on equipments.

Elcina furtherestimates that reduction in excise levy would ensure that imports of components through illegal channels are curbed. The equipment manufacturers would then source the components locally or via genuine imports. Either way, this would increase the revenue collection of the government. Elimination of grey market (comprising under-invoiced and illegal imports) and consequent import through official channels is estimated to yield the government at least Rs 240 crore. The illegal import of components is estimated at Rs 1,200 crore.

Reduced excise would also bring down the prices of components and equipments by an estimated 7-10 per cent.

On changes required in customs duty, the two electronics body were at conflict.

While Elcina felt that a status quo should be maintained, Consumer Electronics & Television Manufacturers Association (Cetma) has stated that duties on items such as CD player mechanisms be brought down to 10 per cent from existing 40 per cent, on colour picture tubes to 20 per cent from 30 percent, and on copper and aluminum articles to 10 per cent from the existing levels of 20-35 per cent.

Cetma has also stated that import duty on plasma and liquid crystal display televisions be halved to 10 per cent. The association has also suggested that duties on video games be raised to 40 per cent from the existing level of 25 per cent.