therefore encourage value addition and create employment in |
duty regime is discontinued under GST, the incentives could |
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the component manufacturing ecosystem. In due course of |
take the form of cash refunds as is currently done under the |
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time, as economies of scale are built up, the differential duty |
VAT system at the state level. |
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regime could be extended to more components, to further increase value addition and generate employment.
Thus, the following tax treatment needs to be considered for providing relief to the industry on an early basis:
1. Extend the following duty structure, currently available to computer tablets and mobile phones, to desktops, laptops and servers:
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7.2 Phase II – Priority action areas
Phase II focuses on disability areas that need attention in next
6-12 months. Key recommendations are
1. Extension of Modified Special Incentive Package Scheme
( MSIPS): Extend the applicability period for MSIPS applications from July 2015 to end of 2020. Include products with high domestic demand forecast such as LED
|
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Ÿ |
Option of concessional rate of excise duty of 2 per cent |
lights, solar cells, smart cards under MSIPS scheme |
|
( 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. |
2. Express custom clearance: Implement express custom clearance processes for electronics manufacturing components. Currently custom clearance in India takes 3-4 days on average, increasing the landed cost of components |
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Ÿ |
Extend differential duty structure to key components / inputs of desktops, laptops and servers such as populated PCB and SMPS. These components should be subject to CVD
@ 12.5 % and SAD @ 4 % when imported. However, the manufacture of the components in India should attract
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7.3 Phase III – Next wave of changes
Phase III focuses on some of the structural changes that might need more time to be implemented. Some of the key recommendations for this phase are:
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excise duty of 2 %. The duty differential will incentivize |
1. |
Express clearance of refund claims: Government needs to |
|
accelerated production in India in line with the‘ Make in |
put in place a SAD, service tax refund process where the |
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India’ vision of the government. The enhanced production |
claimant has high visibility of its claim status. Guidelines on |
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will create additional employment opportunities. |
supporting documents need to be revamped to make the |
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Ÿ |
Exemption from payment of customs duty and excise duty on procurement of all goods( parts, components, |
claim submission process easier for claimant. Lead time of clearance needs to be reduced |
|
accessories including sub-parts for manufacture of parts, |
2. |
Amendment in MSIPS to cover capital as well as |
|
components and accessories) required for use in |
operational expenses |
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manufacture of the goods eligible for the differential duty |
3. |
Deemed export status to domestically manufactured ITA1 |
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regime. |
products |
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2. CST exemption for any inter-state purchase of components or raw |
4. |
Introduction of interest subvention scheme to address the |
|
materials: As per current CST act, any inter-state purchase of |
issue of high cost of finance: Reduce interest cost based on |
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goods for subsequent purchase is taxed at 2 %. This adds to |
the domestic value add by the manufacturer |
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the disability of domestic manufacturers |