The Indian information technology (IT) industry is to seek the government's help to do away with the four percent duty on imported electronics components as that is becoming counter-productive.
"We want to recommend to the government removal of Special Additional Duty (SAD) of four percent on all electronics components that are imported to the country. Importing finished products is becoming cheaper than importing components," Anwar Shirpurwala, executive director, Manufacturers' Association of Information Technology (MAIT), told IANS.
MAIT is the apex body of India's IT hardware industry. Removing SAD "will address the inverted duty structure, place a domestic manufacturer on a par with a trader from a customs duty cost perspective, create a level playing field and thereby encourage manufacture of ITA (Information Technology Agreement) goods in India," said MAIT in its budget recommendations, a copy of which is with IANS.
The World Trade Organization (WTO)-led ITA guarantees zero-tariff and duty-free trade in hundreds of products. The ministry of IT & Communications estimates that India's demand for IT hardware & electronics is expected to touch $400 billion by 2020.
With the current rate and base of domestic production, an expected $320 billion worth of IT hardware & electronics is expected to be imported into India to cater to the burgeoning demand.
India almost imports all its electronics consumption. In 2014, almost $12.5 billion worth of hardware was consumed here. Manufacturing only caters to about 5-10 percent of the total consumption. The industry is hopeful about the three flagship programmes announced by Prime Minister Narendra Modi - Digital India, Make in India and Smart Cities.
The association is also looking at certain incentives for ITA-bound goods that will potentially encourage their domestic manufacture, result in import substitution and effectively reduce the tax burden on ITA goods. Shirpurwala mentioned that India has huge opportunity for manufacturing. "Domestic as well as foreign players are interested in setting up manufacturing units in India," he added.
The recommendations focus on ease of doing business as well. "Speedy disposal as well as modification of norms for Customs Special Valuation Branch (SVB) proceedings is imperative. The current process of obtaining an SVB order is fraught with delays. SVB proceedings should be dispensed with or at least fast-tracked for all zero duty imports," he added.
It has also been suggested that the central government come out with the draft goods and services tax (GST) legislation at the earliest for understanding, discussing and eliciting the views of business and trade.
The industry stakeholders also highlighted that the government needs to reduce the time for customs clearances. "The average customs clearance time in India ranges between three to four days, which is much higher than the time taken in countries like Malaysia and China (where the time taken is less than eight hours owing to a green channel)," MAIT stated.