The Hindu Business Line : Mixed bag, says hardware industry on Budget

Chennai, March 1 The IT hardware industry is happy that it has been left largely untouched by Budget proposals for 2008-09. Mr Vinnie Mehta, Executive Director, Manufacturers’ Association for Information Technology (MAIT), the country’s representative body for IT hardware, training and R&D sectors, said: “There aren’t too many changes for us. That’s a good thing.”

Of consequence to the industry is the Finance Minister’s proposal that products that fall under both the information/communication as well as the entertainment categories, (and hence referred to as convergence products), would see customs duties come down from 10 per cent to 5 per cent.

The likes of MP3 digital music players had earlier seen excise duties brought down from 16 per cent to 8 per cent and customs duty reduced from 10 to five per cent. These have been overtaken by MP4 players, Mpeg4 players, iPod Video players and devices that are Bluetooth enabled. In order to clarify that these would all attract similar duties, and to avoid litigation due to confusion, the Finance Minister has stated that these convergence devices would see a customs duty slump from 10 per cent to 5 per cent, Mr Mehta said.

The overall excise duty ceiling has been brought down from 16 per cent to 14 per cent, on all products, including IT products. Mr Mehta said: “Computers attracted, and now continue to attract, a benign rate of 12 per cent.”

The Finance Minister had stated that wireless data cards would attract zero excise duty, down from 16 per cent. Mr Mehta said: “There is still an additional 4 per cent duty on some items, for which one could claim a refund. It is still not clear if these data cards fall in those categories.”

He added that there would now be parity in the context of packaged software attracting 12 per cent excise duty, up from 8 per cent, and customised software attracting a 12 per cent service tax. “Anyone who buys hardware does not buy hardware alone. We welcome this parity on the software front.”

The Budget evoked mixed reactions from industry players. TVS Electronics is happy with the reduction of excise duties. Mr M. Somasundaram, Executive Vice-President, Transaction Business Unit, TVS Electronics, said, “Excise duty reduction from 16 per cent to 14 cent will help in stimulating growth for the industry. Countervailing duty reduction coupled with CST rate reduction by one per cent will bring down the input cost.”

Moser Baer, the maker of CD/DVDs and a player in the photovoltaic energy generation market is not wholly really ecstatic. Mr Yogesh Mathur, Group CFO, Moser Baer India, said: “The Budget this year is a mixed bag. While we are disappointed with the corporate tax and surcharge rates being unchanged, the reduction in CENVAT from 16 per cent to 14 per cent and lowering of Central Sales Tax to 2 per cent are progressive measures.@ It welcomes the setting up of a national fund for power transmission and a Permanent Institutional Mechanism for promoting renewable energy. “These are steps in the right direction for the renewable energy sector.”

On the IT peripherals front, he said that the industry would gain from the Rs 1,860 crore outlay for rural broadband and data networks. “Overall, a lot more could have been done to boost the industrial growth rate.”

Mr Amar Babu, Managing Director, Lenovo India, said: “The supply chain would be simpler to operate with the introduction of a uniform central sales tax. It is a known fact that our industry has been impacted due to the low abatement rate fixed by the Govt for MRP-based excise duty. The Budget had not addressed the special additional duty (SAD) being levied which is hurting manufacturing units.”