The Government of India recognizes the significant role of the |
the country . The disability on account of fiscal / tax factors for |
manufacturing sector , including the IT electronics sector for |
the IT hardware segment ( notebooks , desktops , servers etc .) is |
achieving India ’ s potential of economic development . The |
estimated at 6.47 % while the disability on account of physical / |
‘ Make in India ’ initiative launched by the Prime Minister |
business environment factors is estimated at 9.40 %. Thus , the |
envisions an increase in the manufacturing sector growth to |
total disability that the Indian IT and Electronics sector has to |
12-14 % per annum over the medium term and increase the |
suffer is 15.87 %. |
share of manufacturing in the country ’ s Gross Domestic |
The ability of the Government of India to address some of the |
Product from 16 % to 25 % by 2022 . Within the manufacturing |
controllable factors such as tax rates will make manufacturing |
sector , the growth of the IT electronics sector is critical for |
in India more competitive . This will not only increase the |
realising the visionary initiatives of ‘ Make in India ’ and ‘ Digital |
capacity utilisation of existing players but also attract |
India ’ launched by the Government . |
investments from other players , who are currently exporting |
The electronics market of India is expected to increase with a |
their products into India but not manufacturing . |
Compounded Annual Growth Rate ( CAGR ) of 66.1 per cent to |
The following tax issues need to be considered for providing |
|
1
USD400 billion by the year 2020 from USD31.6 billion in 2015 .
|
relief to the industry on an early basis : |
|
However , domestic electronics production accounts for only around 45 percent of the total market demand , which leaves a wide demand-supply gap to be filled and provides a significant opportunity to improve domestic manufacturing capabilities .
The estimated production will reach USD 104 billion by the year 2020 , creating a gap of USD 296 billion in demand and production . This is a serious cause of concern because , growing at this rate , the electronics import bill is expected to far exceed the oil import costs by 2020 and could result in a balance of payments crisis .
The Government recognises the gravity of the growing import bill and is keen to promote domestic manufacturing in this sector . However , despite the large local market , there has been limited new investment in this area . Even the current capacity utilisation of the industry is low . A number of manufacturers in this industry are global corporations that undertake production in select locations around the globe and serve the global markets from a few manufacturing plants .
Therefore , the industry evaluates a number of countries where manufacturing can be undertaken at a low cost and with limited risks .
India , compared to other low cost jurisdictions , poses some disabilities for the manufacturers . The cost of manufacturing is estimated to be higher in India vis-à-vis other global options .
The higher costs are on account of ( i ) physical factors such as higher costs of power , real estate , logistics , additional expenses on account of freight , etc . and ( ii ) fiscal factors . India
has a multitude of taxes and duties imposed by both the
Central and State Governments . Because of their flawed structure , these taxes often discriminate against domestically manufactured products .
|
1 . Extend the following duty structure , currently available to computer tablets and mobile phones , to desktops , laptops and servers :
Ÿ
Option of concessional rate of excise duty of 2 per cent
( without availing CENVAT credit on inputs and capital goods ) on the finished goods ( desktops , laptops , and servers or alternatively , the option of standard excise duty rate of 12.5 per cent with full CENVAT credit . In due course of time , as the component manufacturing capabilities mature in India , a similar differential duty regime may be considered for critical components such as motherboards , populated PCB and SMPS in order to promote manufacturing of these components and create additional employment opportunities .
Ÿ
Exemption from payment of customs duty and excise duty on procurement of all goods ( parts , components , accessories including sub-parts for manufacture of parts , components and accessories ) required for use in manufacture of the goods eligible for the differential duty regime .
The above duty structure has led to harmonization of duties applicable on tablet computers and mobile phones . Further , the attractive duty scheme coupled with significantly higher levy on imports has clearly incentivised the manufacture of these products in India .
2 . CST exemption for any inter-state purchase of components or raw materials : As per current Central Sales Tax ( CST ) Act , any inter- state sale of components and raw materials for subsequent manufacture and sale is taxed at 2 %. This adds to the disability of domestic manufacturers .
|
This study aims to analyse the state of the IT hardware |
3 . The GST regime : The benefits requested above should be |
manufacturing sector in India , with special emphasis on |
continued under the GST regime also . In case the differential |
desktops , laptops and servers , identifying its inherent |
duty regime is discontinued under GST , the incentives could |
disabilities when compared with China and proposes tax policy |
take the form of cash refunds as is currently done under the |
interventions in the immediate and short term that can lower |
VAT system at the state level . |
the disabilities , reignite the growth in this sector and help it to contribute to India ’ s vision of ‘ Make in India ’ and ‘ Net Zero |
Impact of policy interventions
The study provides estimates of the revenue impact of the
|
Imports ’. |
proposal for differential excise duty for finished goods without |
For the purpose of this study , the overall disability has been |
CENVAT credit , with exemption for components , parts , |
considered to be the difference in the selling price of a product |
accessories and sub-assemblies of such products , under the |
manufactured in India and the price of the same / similar |
following static scenarios : |
product when imported , including all import taxes , as a |
Scenario 1 : Excise Duty of 2 % on domestically manufactured |
percentage of the selling price of the product manufactured in |
finished goods with CENVAT credit of the 2 % tax to eligible |