The Indian electronics industry is on the threshold of a big digital leap. Certain positive changes in taxation will help to take a giant step forward.
Expert View
Ravinder Zutshi, Dy MD, Samsung India
The Indian electronics industry is on the threshold of a big digital leap. Certain positive changes in taxation will help it to take a giant step forward.
First and foremost, the call of the day is to make the Indian electronics industry globally competitive. For that, overall taxation levels need to be brought down to those prevailing in other southeast Asian countries. Currently, against 7% tax levels prevalent in Thailand and 17% in China, in India the levy is a massive 30%.
In the era of digital convergence, it would be just fair to treat IT products and consumer electronics on par with regard to domestic taxes and levies. Thus, it would make sense for the government to levy a 4% VAT (value added tax) on the entire hardware value chain. Currently, VAT for IT products is charged at 4%, while, for consumer electronics products, it is levied at 12.5%.
In this context, one of the initiatives of the government that I would like to appreciate is the reduction in customs duty on multi-function printers from 12.5% to 0%. However, in terms of VAT, while some states have commenced levying 4% VAT, others continue to impose 12.5% VAT.
There are also some states that are not conforming to the agreed VAT rates for consumer electronics products and are imposing VAT rates arbitrarily.
I would like to laud the government’s move to make the excise duty on monitors MRP-based. However, while the notification has been issued, the corresponding amendments in the Act are yet to be made.
I think the consumer electronics industry will get a big fillip if the excise duties on all products (including components, raw materials and capital goods) are rationalised at 8%.
On the customs duty front, I think we need to correct the inverted duty arising out of the free trade agreements (FTAs). For example, colour TVs are imported from Thailand at 0%, while their inputs attract 12.5% customs duty. Further, we would like the additional customs duty of 4% to continue for all imports. This will serve to give the local industry protection against imports.
On the corporate tax front, we would like the government to remove the 5% surcharge.
All the above mentioned changes will certainly help the electronics industry in India to grow and become globally competitive as India looks to become a global manufacturing hub.
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