Telecom Budget: tax on imports telecom and IT products

In a move to give level-playing field to domestic electronics manufacturing sector, Finance Minister Arun Jaitley today imposed tax on imports telecom and IT products.

“To boost domestic production and reduce our dependence on imports I intend to take following steps. Impose basic customs duty (BCD) of 10 per cent on import of specified telecommunication products that are outside the purview of Information Technology Agreement,” Jaitley said in Parliament.

Union Budget 2014-15 team

India is signee of Information Technology Agreement 1 as a member of World Trade Organisation. Under ITA 1 agreement, member countries should allow duty free import of products falling under eight categories covering telecom, computers and semiconductors like mobile phones and electronic chips.

“The Government signed ITA 1 on 25th March 1997 and committed import of duty free on 217 items. However, several items which were not covered under ITA 1, were also imported Duty Free. So now this has been corrected by levy of import duty on non ITA-1 items,” Telecom Equipment Manufacturers Association Chairman Emeritus NK Goyal said.

He added that the Budget gives a positive signal that while India will meet all its WTO commitments and will also support domestic manufacturing.

The move is expected to encourage production of VoIP phones and some telecom network equipments for which demand is increasing with rapid change in technology, PTI reported.

While ITA allowed import of finished product duty free, domestic manufacturers paid taxes on import of components used for making a complete unit which made indigenous production of electronic products expensive and wiped out almost entire hardware production in India.

The Finance minister proposed to “exempt all inputs/ components used in the manufacture of personal computers from 4 percent special additional duty (SAD)” and “Impose education cess on imported electronic products to provide parity between domestically produced goods and imported goods.”

Industry bodies linked to electronics manufacturing hailed measures announced in the Budget.

“While this is a welcome step as it will encourage telecom products manufacturing, it is not clear why SAD has not been removed from all electronic components and ICT products. SAD is a regressive tax and does not serve any purpose. SAD should be removed from all electronic components and ICT equipments,” ELCINA President Subhash Goyal said.

“The manufacturing incentives for Rs 25 crore plus investments would create massive push to the MSMEs in the electronic sector. This will lead to the inclusive growth of the electronic manufacturing clusters coming up in 7 states, investment and employment opportunities in the non-urban parts of India,” India Electronics and Semiconductor Association (IESA) Chairman Ashok Chandak said.

The government had last year announced similar incentive for companies investing Rs 100 crore and above. The Finance Minister said this scheme will also continue in parallel till March 2015.

The Finance Minister has extended investment linked deduction for critical segment of electronics chip or semiconductor manufacturing to boost investment in the segment.

At present, there is no company that manufactures electronics chip in India. However, the government has cleared proposal for setting up two semiconductor plants entailing total investment of about Rs 63,000 crore.

Telecomlead News Team

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