MAIT recommends growth-oriented measures to boost domestic manufacturing for Union Budget 2013-14

INDIA: MAIT, the apex body representing the interest of IT hardware industry in India , in a memorandum to the Ministry of Finance, Government of India, has emphasized the need for  growth-oriented measures to boost domestic manufacturing in the country.

JV Ramamurthy, president, MAIT said: “The IT Hardware manufacturing industry will provide employment for not-so-lucky people, possessing educational qualifications like ITI and Diploma, besides gender employment. He further said that current internet density and penetration of IT have enough of headroom for growth and India being geographically at a right location in the middle of the Globe, it serves as centre for products and services exports toward African and South Asian countries, besides the Middle East.
"With growing telecom density, growth of Internet and IT, should be easy especially with current large projects’ roll out plan by Government of India and the devices cost tumbling year after year.”

“With manufacturing value addition in India abysmally low, a whopping $320 billion worth of electronics will be imported by 2020, which may exceed the annual oil import bill. Hence, in our recommendations, we have requested the Government to abolish the inverted duty structure on IT components which will help revive the demand and promote manufacturing in the country”, said Anwar Shirpurwala, executive director, MAIT. He stressed the need for a long-term and comprehensive policy framework to encourage manufacturing in the country.

MAIT’s four key recommendations for Union Budget 2013-14 are:

(i) Inverted duty structure for manufacturers of IT products
The impact of inverted duty structure is that it effectively makes direct import by end- customers or trading (i.e. import and sale) of IT products advantageous in comparison to manufacturing of IT products in India.

(ii) Nil rate of CST against Form C purchases of ITA products manufactured in India
It is recommended that sales of ITA bound products manufactured in India for subsequent sale (i.e. resale) against Form C be taxed @ 0 percent so that manufacturing is not placed in a disadvantageous position vis-à-vis trading/direct imports.  For example, if manufacturing units are located in one State, the manufactured products attract a CST at 2 percent in inter-state sales, while traders/direct importers import the goods into the State of consumption and totally avoid the CST cost, thus putting domestic manufacturing at a disadvantage.

(iii) Removal of Basic Customs Duty on IT accessories
Given that such accessories such as adapters, battery, laptop carry bags, speakers form critical parts of the main IT product, imposing custom duties on the same increases the cost in the hands of the manufacturers (and disincentivises manufacturing), which impacts the pricing to end-customers.

(iv) Enhancement of MRP abatement
Considering the prevalent rates of excise duty, sales tax in addition to logistics/transportation costs and dealer margins, we recommend that this anomaly should be corrected by increasing the abatement from existing rate to 40 percent on IT products.