Financial Daily from THE HINDU group of publications
Sunday, Apr 11, 2004
Industry & Economy - Excise and Customs
Will PCs become dearer?
New Delhi/Bangalore , April 10
IF excise duty (of 8 per cent) is to be levied on the price of all software that comes bundled with PC hardware, PCs would become marginally costlier.
Industry sources indicate that in the case of the Microsoft XP operating system for home users, which costs between Rs 5,000 and Rs 6,000, excise duty would come to nearly Rs 500. This is an extra cost that a consumer would have to bear.
The same applies to other software such as the Office suite.
Though, if the vendor sells large volumes of machines, it is possible that he is able to buy software at a lower price.
As a result, the duty levied on it would be lower.
For the year 2002-03, 2.3 million PCs were sold in India. Of these, 700,000 are branded PCs for which duties and taxes
would have to be paid. At a minimum extra of Rs 500 per PC, the cost to the industry would come to approximately Rs 35 crore. For the year ending March 2004, it is estimated that three million PCs would have been sold.
The impact of excise duties on bundled software may then be higher. These costs could be passed on to the end consumer.
The true burden for the industry would come if it had to pay duties with retrospective effect from a certain date in the past. That is an expense that vendors would have to bear.
However, if a Linux operating system is loaded on a PC, the increase in PC cost would not be significant as Linux, with value-adds from vendors, costs only around Rs 1,000. Eight per cent of that is negligible and manufacturers would typically absorb that bit, industry watchers feel.
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