Duty reduction required to incentivize domestic IT hardware production

Dr. Ajay Kumar (left), Additional Secretary, Ministry of IT and Manasvi Srivastava of Assocham, at the event in New Delhi.

A Roundtable organized by ASSOCHAM was held on 16th December, 2015, at Hotel Lalit, New Delhi. The topic was ‘Make in India: Trade and Fiscal Incentives for the IT Hardware and Electronics Industry.’ Dr. Ajay Kumar, Additional Secretary, Ministry of IT, was the speaker from the government whereas the industry was represented by Dell, Microsoft, Lenovo and Texas Instruments. Dr Pralok Gupta from IIFT shared his views on Global Trade and India’s current position and potential with regard to the same.

The Roundtable brought key asks from the industry to the fore which included incentivizing the domestic manufacture of electronic goods especially Personal Computers and Laptops (which currently is rather low) and to discuss ways of massively increasing India’s share in manufacture of IT products globally.

The industry specifically asked for a duty reduction for Personal Computers and Laptops in line with what has already been done for mobile phones and Tablets by the Government to incentivize domestic manufacture. While MSIPS is scheme that already exists for manufacturers that grants production subsidy, there is a need to look at fundamental aspects which would make global players look at India as a preferred destination for manufacturing. This is very important given that a few countries like China and Taiwan account for a significant share of the global trade in Electronic goods specifically computers.

Separately Mr. Satya Poddar, Partner, Ernst & Young specified how the domestic manufacture has been adversely impacted due to the taxation regime in India. He cited how the valuation basis for taxation being different for customs and for local manufacture resulted in higher excise duty being paid for all domestically manufactured products. Added to this differential is the differential VAT rate that is different in various States ranging from 4 per cent to 12 per cent, compared to the single VAT equivalent rate of 4 per cent for imports and other miscellaneous duties and taxes like the electricity duty that is imposed on domestic manufacture. He said that all this leads one to believe that it is cheaper to import than to manufacture in India. While GST would address some of these issues, there is a need to look at the taxation regime more closely to remove any advantage for imports over the domestic manufacture.

Dr Ajay Kumar mentioned that India has suffered on the domestic manufacture front in view of the ITA agreement which made imports cheaper, hence it is crucial to look at go forward policy on ITA goods; India in any case is not participating in the current round of discussion to expand the list of ITA goods. He emphasised upon the need to manufacture low-priced laptops in India to spur computer manufacturing. He outlined at length the opportunities that would soon arise to spur demand for computers in India given the digitisation efforts that are being planned by the Government in various segments including rural areas and specific sectors such as health care, research and innovation. This he hoped would increase the digital footprint across sectors and hitherto untapped areas resulting in an inclusive digital growth of the country as a whole.