The Hindu Business Line : Consumer electronics industry calls for VAT regime

THE consumer electronics industry has urged the Government for the introduction of a composite value-added tax (VAT) regime and reduction of customs duty.

In its pre-Budget recommendations, the Consumer Electronics and TV Manufacturers Association (CETMA) said that the growth of the industry has been hampered by the high prices of consumer electronic products.

The domestic market in India for colour televisions (CTV) is only eight million sets and exports are less than one million sets. Compared to this, China's domestic market for CTV is 40 million sets and exports of CTV sets are more than 15 million. Currently, there is a central value-added tax (Cenvat) of 16 per cent, on almost all the consumer electronic products. In addition, state governments charge sales tax and other taxes.

"We are happy that VAT will now be introduced in all States from April 1, 2005. We hope that the Government will not shelve it again," CETMA said.

``We also strongly recommend that Central and State VAT should be combined and a composite VAT of 17 per cent, as is applicable in other countries such as the European Union, China, Nepal and Bangladesh, should be levied on electronic products,'' it said.

The association also sought abolition of Central sales tax (CST). ``Since special additional duty has been abolished, imposing CST (or local tax/purchase tax) is a disincentive to the domestic manufacturer,'' it pointed out.

On the reduction of customs duty on electronic products and inputs, CETMA said the industry has been making efforts to reduce the costs so that the market for the products increases. However, it is adversely affected by high cost of inputs, arising out of a high customs duty at a peak rate of 20 per cent.

``To bring down the prices of the consumer electronic products, we recommend that customs duty on all consumer electronic products and its inputs be brought down to 10 per cent, in this year's Budget,'' it said.

Further, the customs duty on basic raw materialsis very high, varying between 10-20 per cent, which renders Indian products globally non-competitive. The customs duties on raw materials should be brought down to zero per cent. It will lower the cost of inputs, thereby making Indian industry globally competitive, the association said.

Another issue concerning the industry has been the inverted duty structure arising out of free trade agreements.The association has also recommended that Cenvat on all consumer electronic products, including components, raw materials for components and capital goods for the industry, should be rationalised to eight per cent.

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