New Delhi: In its pre-budget memorandum to the finance ministry, Manufacturers Association of Information Technology (MAIT) has asked for a stable environment for the IT hardware and PC industry in order to thrive, by avoiding short-term reforms in the current duty structure.
According to MAIT executive director Vinnie Mehta, government policies over the last two years have been mostly favourable for market growth, and for attracting investments in IT and electronics manufacturing.
MAIT has also said that any changes to the duty structure should be proposed once the government has finalised a long-term fiscal framework. MAIT says its members emphasised the need for a long-term, holistic fiscal policy framework to encourage value-addition and to give a fillip to the IT hardware industry in India.
MAIT's recommendations for the Union Budget 2008-09 have been put together by an international external professional agency, after an in-depth research and analysis on the impact of taxation on the country's entire value chain.
Providing a favourable duty regime, with appropriate incentives for component manufacturers in India, would have a positive impact on the industry, said the association, while cautioning that any benefit to the industry should be viewed from the standpoint of the entire value chain, in order to avoid tax blockages. According to Mehta, the continuation of the existing tax structures including the 12 per cent excise duty on PCs should also be seen in this light.
Presently computers are classified as capital goods under the CENVAT Credit Rules 2004, which stipulates that the credit is available only if the computer is used in the factory of the manufacturer of the final products. MAIT has suggested a widening of this scope to include any use within the business, and not just within the factory premises.
Computers in India currently also have a four per cent Central Sales Tax (CST) levy for both manufacturers and service providers. Dealers and resellers can avail a concessional CST rate of three per cent, if they provide the statutory forms (Form-C). The tax is non-creditable for any class of buyer. MAIT has suggested that service sectors such as banking, insurance, hospitality, leisure, and education should also be allowed to avail this three per cent CST concession.