NET ZERO IMPORTS
Annexure D : Electronics Industry Policy comparison between India and China :
Tax Policy
Corporate tax
China
The singular rate of enterprise income tax ( EIT ) is 25 %.
India
Presently , there is a differential rate for domestic and foreign entities at 30 % and 40 % respectively . India proposes to cut down the corporate tax at a uniform rate of 25 % in next four years .
Incentives Available to Electronics Industry
Research and development
1 . High and new technology enterprises ( HNTE ) avail a reduced rate of EIT @ 15 %.
Conditions to be satisfied :
a . The activities to be qualified as High Technology is subjected to approval of Tax Authorities and to be renewed at every three years afresh to continue enjoying tax benefits .
b . The activities qualifying for HNTE category does not necessarily have to be situated within China they can be outside China but in such cases their HNTE status have to be comprised of only 40 % of their HNTE activities .
1 . State provides for reimbursement of the expenditure incurred on research and development ( R & D ) along with additional deduction of 50 % of such expenditure in case these expenditures are not capitalised as intangible assets .
2 . In case R & D expenditure is capitalised , it is amortised at 150 % of its cost .
1 . Provision for reimbursement of Central taxes and duties is available for high technology and high investment units . For example : Fabs etc .
2 . Modified special incentive package scheme is available to all the units across the electronic value chain and covering 29 verticals of electrical products :
a . 20 % subsidy for capital expenditure investment in special economic zones ( SEZs ).
b . 25 % subsidy on capital expenditure investment in non- SEZs .
1 . Upto 100 % deduction for R & D expenses is available which meets the defined criteria .
2 . 200 % super deduction is available for in-house research expenditure .
3 . 150-200 % super deduction is also provided for payment to prescribed institutions .
Import Duty Exemptions 1 . These are available on “ eligible ” domestic and foreign invested R & D .
2 . Domestic procurement for R & D also makes the manufacturers eligible for refund for VAT .
1 . Duty free Import of goods for development , operation and maintenance of units .
2 . Domestic procurement of goods for R & D exempts them from state duties .
Manufacturing Exemptions
1 . Integrated Circuit manufacturing is exempted from EIT for first two years , in the following three years manufacturers avail a rate of 50 % EIT , starting the first profit making year .
2 . Investments exceeding 8 Million RMB , or Manufacturers producing line products with line width of less than 0.25 millimetres pay EIT @ 15 %,
3 . Or for longer investment periods of more than 15 years . Units are exempted from EIT for the first 5 years , followed by a reduction of 50 % for the next 5 years starting with the first profit making year .
1 . Electronic hardware technology parks incentivise the hardware manufacturers . In particular the export profits are fully exempt from taxes .
Spotlight on Indian Electronics 2016 | 82