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Finmin scraps 4% duty on domestic IT, telecom goods
March, 03rd 2007

The finance ministry has quietly withdrawn its notification issued last week, specifying a 4% additional duty on nine IT and telecom products, including mobile phones manufactured locally in SEZs.

The finmins retreat may have been triggered by the industrys warning that that this additional levy would be a major blow to countrys upcoming domestic manufacturing sector, industry sources said.

Meanwhile, as reported by ET, the ministry of communications and IT on Friday said that the total FDI commitments in the IT and telecom sectors over the last 24 months had touched Rs 80,000 crore. The ministrys data reveal that manufacturing accounts for a significant majority of the foreign investment in India.

Apart from mobile phones, the other components on which the additional levy was imposed and now withdrawn include micro-processor for computers (other than mother boards) floppy disc drive, hard disc drive, CD-ROM drive, DVD drive, USB flash memory, combo drive and radio trunking terminals.

While welcoming the withdrawal of the notification, the Telecom Equipment Manufacturers of India pointed out that if the government had continued with the additional levy, then MNCs which have set up their manufacturing bases in Indian SEZs, would have been at a disadvantage over direct importers.

Besides, if this duty was in place, in the long run, the existing eco system of mobile manufacturing would not have been economically feasible and the existing production bases and additional investments committed by existing and future investors would also have been in jeopardy, Tema added.

The mobile manufacturing in India is back on track. We are grateful to the finance ministry to set right the basic policy for manufacturing, Vinnie Metha, executive director of hardware association, MAIT, told ET.

Global MNCs such as Nokia, Samsung, Ericsson, Elcoteq, LG, Nokia, Alcatel including others have all set up manufacturing units in India in SEZs. As per the data compiled by ministry of communications and IT, against 28 companies that outlined their investment plans, 17 have already infused the capital.

In the manufacturing side, these include, include Ericssons investment of $150 million investment, Elcoteqs $100 million, LGs $12 million, Nokia at $200 million, Aspocomp at $200 million, Salcomp at $8 million, Honhai at $100 million, Samsung at $200 million, Siemens at $100 million and Flextronics and Motorola each at $100 million.

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