The Hindu Business Line : 2004 deadline likely for IT, telecom zero duty

THE Finance Ministry is looking at the option of setting 2004 as the deadline for a zero duty regime for information technology and telecom products and their inputs, following representations made by the Ministry of Communications and Information Technology.

As a signatory to the ITA 1 schedule, the Government had voluntarily advanced the deadline on the zero duty regime to 2003. However, in their pre-Budget representation to the Finance Ministry, the MC&IT backed the hardware industry's demand for pushing back the deadline by two years to 2005.

Government officials said that the Finance Ministry was considering the option of postponing the deadline by at least one year. They pointed out that during the pre-Budget Ministerial level discussions, the Finance Minister, Mr Yashwant Sinha, is understood to have given a clear indication of providing greater support to the hardware sector.

Other alternatives being looked into include a further reduction in the customs duty on IT and telecom products. Import duties on these products were down to 15 per cent in this year's Budget, where Mr Sinha announced that the Government would adhere to the 2003 deadline.

If the ITA 1 schedule is to be adhered to, it would have to be backed by a full duty waiver on inputs and capital equipment used in the manufacture of electronic components. In case this is not done, it would create problems of an inverted duty structure.

The task force on hardware had, in fact, made out a strong case for according full import duty waiver on 548 items to boost the performance of the electronic component and equipment sector. Of these around 120-odd items of non-dual use attract a duty of five per cent. A waiver was also proposed for 217 odd additional raw materials and 342 additional capital goods with duty rates of 25-30 per cent.

To rectify the inverted duty structure, industry associations — CETMA, ELCINA and MAIT — have recommended that the customs duty on all capital goods for electronics manufacturing including tools, dyes, moulds be brought down to nil from the existing 25 per cent in the ensuing budget. A full duty waiver has also been proposed on inputs including dual use items such as steel, plastics and chemicals.

The duty waiver proposal has, however, been opposed by both the Ministry of Industry and the Department of Chemicals and Petrochemicals on the grounds that it would adversely impact the domestic industry. A review of the deadline is being looked into since several attempts by the Finance Ministry to resolve the inter-Ministerial wrangle have so far not been fruitful.

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