MAIT, the apex body representing India’s IT hardware, training and R&D services sectors, has released a recommendation document aimed at the IT hardware industry on behalf of the upcoming Union Budget 2014.

The budget in the interim certainly is of paramount importance not only from a clear-mandate perspective where the Government from its barrio can undertake pivotal actions, but then again correspondingly; surfaces as the most awaited policy thrust of the Narendra Modi coxswained Government setting expectations at the pinnacle.

This direction document in the form of the budget will spell out India’s growth saga and a credible budget would be instrumental in assisting the economy pilot itself by way of overhauling reforms and regulatory agenda.

Stating on the upcoming Budget, Amar Babu, President of MAIT, held that, “This budget marks the first litmus test propelling the development agenda; the past years have witnessed an economic downturn and a downturn of domestic growth. The Budget should address the issues curtailing investment sentiment and bring renewed optimism for sustained economic growth; conversely the government should quickly amend the policy paralysis with regards to the ease of doing business.”

Anwar Shirpurwala, Executive Director, MAIT informed that, “The Hon’ble Finance Minister, Arun Jaitley should drive reforms around the ten point agenda that Mr. Modi has eloquently articulated. Recognizing the multifaceted contribution of manufacturing and electronics on a war-footing basis, the government should prioritize reforms that can navigate the challenges the manufacturing and ICT industry face every day. It should give boost to local manufacturing, early implementation of goods and service tax and credible policies to attract investments.”

MAIT Recommendations en route for overhauling manufacturing, electronics and ICT are as follows, viz:-

• Recommendations on Inverted Duty Structure for manufacturers of Information Technology Hardware

Beavering the lacuna with respect to Inverted Duty Structures would buoy up the manufacturing scene in India. The government should exempt SAD on all components used by  a manufacturer of IT hardware by necessitating amendments in Notification No 21/2012-Customs (T) dated March 17, 2012 and imposing necessary safeguards through specification of a condition of end use (in manufacturing/by a manufacturer) to be able to create a level playing field

• Recommendations on concessional rate of duty for Computers and Tablets

Decreasing the rate of duty applicable on indigenous manufacture involving laptops and tablets is the need of the hour to be able to boost computer manufacturing in a country where manufacturing is disproportionate to the ratio entailing demand. The rate could also be aligned to avoid unwarranted disputes as regards the classification and treatment of goods in terms of features as well as composition at the stage of import. This also distincts the line of commonality in a tablet as well as smart-phone.

MAIT from its quarter also recommends that indigenously manufactured personal computers and tablets be extended concessional excise duty similar to mobile handset manufacturing in India by amending Notification no 12/2012 dated March 17, 2012 to make available a concessional duty scheme in respect of goods classifiable under chapter 8471. An excise duty rate of 5% with CENVAT and 1% without CENVAT could be extended to personal computers and tablet computers by way of an amendment.

• Recommendations on Dual taxation on sale of packaged or canned goods

A clarification to be issued with regard to software licensors involved in sale of pre-packaged software which seeks to clarify that irrespective of whether software delivered to the media is electronically accompanied by a license of otherwise; this license entails transfer of right to use goods and is outside the purview of service tax.

MAIT seems to clarify that distributors are carrying out sale of pre-packaged software without having any rights to issue licenses and for that reason; transactions shall not be treated as service liable to service tax

• Recommendations that ITA Products be counted in the list of declared goods

Inconsistency in VAT rates for same goods in different states provides undue hardships for the manufacturer while calculating different rates for states. This difference in rates causes a diversion of trade discriminating free flow of trade within the country. The CST Act should be amended to specify ‘All ITA bound goods” to be ‘declared goods’ under the section 14 of the CST Act so that these goods attract uniform rate of VAT of 5% across states. This ensures that same goods are not subject to a different rate of CAT and safe-guard against diversion of trade.

• Recommendations on Accelerated Depreciation on ITA Products

MAIT advocates that the expression ‘computer and computer peripherals’ may be substituted with the expression ‘information technology and telecommunication hardware’ in Rule 3(5A) (a) (i) of the CENVAT Rules as well as in Notification 22/2003 – CE and Notification 52/2003 – Customs. MAIT expresses hope that a comprehensive list of all ITA products and telecommunication hardware (aligned to the list of 217 ITA bound goods specified under Notification Nos 24 and 25/ 2005 – Customs both dated March 1, 2005) be notified for the benefit of accelerated depreciation in the aforesaid Provisions/notifications.  MAIT also presses that the rate of accelerated depreciation may be revised to 10 percent per quarter or part thereof in the aforesaid provisions/notifications.

• Recommendations on Need for expeditious introduction of GST

MAIT has sought clarity on the date of Implementation of GST with uniformity in procedures and documentation across the country. Correspondingly, uniformity in GST rate as well as threshold for levy across goods and services and across the centre as well as state laws may be published at the earliest.