IT hardware body MAIT has sent a letter to the Prime Minister with top four recommendations covering inverted duty structure, tariff and duty anomalies, providing impetus to ICT hardware imports and developing a robust manufacturing eco-system. There are other important priorities which have been addressed in the letter.
Urging the Prime Minister to consider the recommendations, MAIT, which represents the over $13 billion Indian IT hardware manufacturing industry, said it will continue to actively engage and jointly work with the government towards making 'Make in India' a success.
Here are key recommendations from MAIT:
Under Indirect Tax
1. SAD exemption to be extended across all ITA goods, their parts, sub-parts and accessories
The above measure would effectively address the inverted duty structure; place a domestic manufacturer on par with a trader from a customs duty cost perspective; create a level playing field; and thereby, encourage manufacture of ITA goods in India.
2. Extension of excise exemption for manufacturing in specific states ie; Himachal Pradesh and Uttarakhand
Excise holiday be extended for a further period of 10 years in these two states as against the existing period of 10 years for all units already in operation (including those units for which the exemption may have expired in 2013).
Likewise, any new units commencing production on or before March 31, 2015 may also be bestowed with central excise exemption for a period of 15 years.
This will give the manufacturing sector the required boost to compete with traders.
3. As per the current provisions of CST Act, interstate purchase of goods for subsequent purchase is taxed at the rate of 2 percent against issuance of Form C
It is suggested that all interstate purchases of components and raw materials meant for subsequent sale or use in manufacture/processing of goods for sale against Form C be taxed at 0 percent so that there is no cascading effect of taxation on such goods.
4. ‘Deemed Exports’ status should be provided to ITA bound goods
Such benefit shall potentially encourage domestic manufacturing of the same, result in import substitution and effectively reduce tax burden on ITA goods.
Ease of doing business:
1. 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 including for IT hardware attracting NIL rate of BCD and MRP based CVD assessment.
2. GST Implementation is expected to address several issues under the current scheme of taxation of goods and services by the Centre and States. Hence, draft GST legislation may be published at the earliest in order to provide industry views and suggestions to ensure smooth and robust implementation of the GST legislation.
It is recommended that Central Government should come out with the draft GST legislation at the earliest for the purpose of understanding, discussions and eliciting the views of the business and trade.
Business community should be provided sufficient time to understand and study the legislation and its implications on the business and trade and to contribute with the views and suggestions. The views and suggestions made by the business and trade community can thus be suitably accommodated, clarified, taken into account at the time of introduction of formal GST legislation.
3. While the self-assessment procedure has reduced customs clearance time-lines, the time taken for clearance of goods under customs in India is still time consuming. The lengthy process for clearance of goods under customs can be attributed to the following reasons:
-- Time consumed in analysing the process for free of charge shipments;
-- Process for obtaining a Chartered Engineer certification process;
-- Goods are pushed through the SVB channel even when goods are cleared under duty exemption schemes:
-- No clear provisions governing hand carry, which is critical for R&D samples / prototypes / semi-finished goods:
-- No option for clearing high value consumables under the duty free mode, apart from STPI / SEZ units; and
-- No option for payment of duty post clearance of the goods.
Accordingly, due to the reasons mentioned above, the average customs clearance time in India ranges between 3-4 days, which is much higher in comparison to the time taken in countries like Malaysia, China, etc (where the time taken is less than 8 hours owing to green channel).
Recommendations for reduction in time for the customs clearances time in India
-- We can extend green channel facility for free movement of goods pertaining to R&D shipments. This has been a proven mechanism in other countries to reduce the through put time in respect of such goods to a few hours.
-- Schemes to promote hand carry of goods and provide monthly customs duty payment facility.
-- Relax mandatory first check processes at the ports pertaining to free of charge / exempted shipments.
-- However, there could necessary checks post the entry of the goods.
-- Clarify that SVB procedure shall not be applicable on the import of duty free shipments.
Under Direct Tax
1. Accelerated depreciation on IT products is a concern for the IT industry. IT hardware manufacturing industry is an industry which has suffered competitive disability when compared with countries like China. One of the reasons which affected the industry is huge investments in infrastructure and Plant & Machineries (`P&M').
It is recommended that the rate of depreciation in relation to computers, software and other IT products be increased from the existing rate of 60 percent to a rate of 90 percent which would then bring an increased correlation between the tax depreciation and the usage of such IT products. This would also reasonably align the period of depreciation for income tax purpose with that under indirect tax laws.
Also, in respect of the rate of depreciation on capital goods (other than computer and accessories and software) such as printers etc (for which the rate of depreciation is at a further lower rate of 15 percent), the rates should be increased to make it in line with the accompanying computer for which the existing rate of depreciation is 60 percent.
Alternatively, on the lines of investment linked incentives contemplated under the provisions of section 32AC of the Act, new provisions could be introduced as an investment allowance whereby, the company can claim the investment allowance in addition to the allowable depreciation. Also, the qualifying (minimum) limit of investment of Rs 100 crore as mentioned in section 32AC (which has been brought down to Rs 25 crores in the last budget) could be further reduced to Rs 10 crore to provide a boost to the companies engaged in manufacturing of IT and related products.
A boost to the IT sector will not only benefit the manufacturers but also to the society at large as it would provide increased job opportunities and would also contribute towards an increase in the GDP of the country.
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Updated Date: Feb 23, 2015 14:10:20 IST