Press Release 

Stability in Policies: Key to IT Market Growth and Investments

Ø  Measures for growth – need of the hour

New Delhi; June 03, 2009: MAIT, the apex body representing India’s IT hardware, training and R&D services sectors, in a memorandum submitted to the Union Finance Minister on June 02, 2009, late evening, has stressed the need for a stable policy regime for the IT hardware industry and for growth-oriented measures to boost domestic IT consumption. In a pre-budget analysis of the industry and the economy, MAIT Executive Director Mr Vinnie Mehta commented: “The monetary and fiscal measures announced by the Government in the recent past have been able to instill confidence in the industry to an extent. With lower than expected consumption of IT products in the financial year 2008-09 owing to the economic slowdown, we now hope for a long-term growth-oriented policy.” 

Mehta continued: “MAIT members have unanimously and repeatedly emphasized that a long- term, holistic fiscal policy framework is needed to encourage deepening of manufacturing and to give a much needed fillip to the IT hardware industry in India. Continuation of the existing 8% excise duty/CVD on all IT products, across the value-chain, should, therefore, be seen in this light. Further, providing appropriate incentives for IT manufacturers - finished products and components in India, as in the case of semiconductors, would have a positive impact on IT manufacturing investments.”  

Elaborating on the recommendations, Mehta added: “As technology – computers and broadband combined, is today considered a strategic differentiator for any economy, it is essential to roll out mission mode IT projects in sectors such as education, SMEs, households, e-governance, telemedicine and for rural India. These will go a long way in contributing to our national goal of ‘inclusive development’.” 

 The key MAIT recommendations for Union Budget 2009-10 are: 

• Continuation of 8% Excise duty/CVD on all IT products – Computers, peripherals and components. This has been a long-standing demand of the industry. It should be ensured that the IT manufacturing has a seamless CENVAT chain i.e. the output/finished products at no stage should be at lower excise duty/CVD than the inputs/components. Further, it is strongly recommended that the rate of service tax be aligned to that of the Excise duty/CVD to avoid structural anomalies. Currently the Service tax is pegged at 10% while the rate of excise duty/CVD is 8%.
• The 4% SAD – Special Additional Duty, should be abolished on all IT products and components. The SAD was introduced on imports to balance the impact of local taxes on domestic-manufactured products. With CST being phased out, the SAD should, therefore, be abolished or at least be made at par with it.
• The Excise duty/CVD on IT products such as notebooks, printers, set-top boxes, etc. has been levied on the MRP since January 2005. Abatement is provided while computing the duty reflecting the local taxes and the channel margins, which is 20%. Unfortunately, this rate does not reflect the correct cost structures of the industry. At the time of introduction of such a system, the industry was assured that such a rate would be revenue neutral, however with the current applicable rate, the effective duty has gone up by at least 50%. It is, therefore, recommended that the rate of abatement be enhanced to 35%, to be at par with similar consumer durables.
• There is a very significant confusion on the taxation to be meted to software. This is as the packaged software attracts excise duty/CVD, however no excise duty/CVD is charged on customised software on media or on license of customised software or even on license of packaged software, further when software is downloaded from the internet, it is subject to service tax. The State Governments also levy a VAT on software. Due to various modes of delivery of software, licenses and due to various kinds of software, there is no clarity on the exact taxes to be levied. The taxation authorities have been, at times, levying both excise duty/CVD as well as services tax. The industry is committed to paying due taxes, however, there needs to be clarity whether software would attract excise duty or service tax, as the same item cannot attract both excise duty/CVD as well as service tax.
   

About MAIT:

Set up in 1982 for purposes of scientific, educational and IT industry promotion, MAIT has emerged as an effective, influential and dynamic organisation. Today MAIT represents hardware manufacturers & vendors, training, R&D and associated services sectors of the Indian IT Industry. MAIT’s charter is to develop a globally competitive Indian IT Industry, promote the usage of IT in India, strengthen the role of IT in national economic development and promote business through international alliances.