Fiscal sops in new hardware policy

Written by Vrishti Beniwal | New Delhi, Sep 11 | Updated: Sep 12 2007, 06:11am hrs
The $35-billion hardware industry has a reason to cheer with the government all set to cut duties and taxes by almost half, bringing them on a par with the Asean level of 12-16%. At present, all the levies add up to about 30-32%.

The much-awaited hardware policy, which has been finalised by the department of information technology (DIT) and expected to be announced shortly, is likely to rationalise the taxes to give a fillip to the sector by encouraging competition, investments and employment.

The hardware policy for the sector is almost ready and will be released shortly after consulting all the stakeholders. About 90% of the issues have been sorted out and it is in the final stages of formulation, a senior official in the department of information technology told FE. To ensure that the domestic industry is not at a disadvantage, the policy will aim to bring taxation in India on a par with Asean.

The policy is also expected to address issues such as infrastructure and skill development besides specifying measures to leverage on research and development skills to make India a hardware hub.

The industry for long has been demanding a reduction in excise duty throughout the value chain and a zero customs duty on all inputs for manufacture of electronics and IT hardware products. Currently, excise duty on television is 16% while the value-added tax is 12.5%. The industry has been demanding a total levy of 5-7%.

The policy envisages rationalisation of taxes. It would give a major boost to the domestic electronics industry by encouraging competition, investments, huge employment generation and new business opportunities, said Vinnie Mehta, executive director, Manufacturers Association for Information Technology (Mait).

Currently, electronics hardware is a $35-billion industry in India, constituting only about 1% of the global market, but projected to be a $62 billion industry by 2010. The policy is expected to help the country catch up with the $240-billion Chinese industry in the global computer and electronics hardware manufacturing sector. At present, Indias electronics exports are just $2 billion, against Chinas $200 billion.