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Consumer durables industry seeks tax sops
February, 03rd 2007

The Consumer Electronics and Appliances Manufacturers Association (CEAMA), a representative of the consumer durables industry of India, has asked the government to bring down the total level of taxes (inclusive of excise duty, octroi and VAT) to between 12-17%, from the existing more than 30%, in order to make the industry globally competitive.

The key industry demands are excise duty cut from 8% to 4%, correct inverted duty arising out of free trade agreements (FTAs) to ensure a level playing field for Indian durable manufacturers. For instance, there is nil customs duty on colour televisions imported from Thailand, while inputs attract customs duty of 12.5%.

It wants differential customs duty on raw materials to be scrapped, components should be 5% while finished products to be at 10% while excise duty on all consumer electronics products to be rationalised at 8% from the existing 16%.

Moreover, the industry also wants the additional customs duty of 4% for import of all zero duty items to continue till local and non-vatable taxes on value chain exist. However, central sales tax (CST) on electronic goods should be totally abolished rather than being phasing out from April by lowering it to 3%.

CEAMA general secretary Suresh Khanna said, The government should bring the down tax rates and abolish all exemptions in excise duty and VAT to ensure economies of scale. With this, exports will double up to 30% in the next two years, while it currently comprises just 10% of the total turnover of the industry. This will also help generate an additional 20 million jobs by 2015.

The cause and effects
Nil customs duty on CTVs imported from Thailand
Demands for change in inverted duty arising out of free trade agreements
Continue additional customs duty of 4% for import of all zero duty items
While inputs attract customs duty of 12.5%
Industry wants excise duty to be cut from present 8% to 4%
It wants differential customs duty on raw materials to be scrapped
Samsung deputy managing director Ravinder Zutshi said, the right support from the government will help the industry take a giant leap. He also said that the government should treat consumer electronics (CE) on a par IT sector, where it concerns domestic taxes and levies. He justified this by saying that the difference between the two sectors is narrowing due to convergence of applications. So, VAT should be 4% across the board on entire hardware value chain.

With taxes coming down, the entire cycle of demand and supply will change for brighter prospects of the industry. The Rs 30,000 crore durable industry that grows at 8-10% is poised for a growth rate of 10-12% this year.

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