The Hindu Business Line : Additional duty on finished imports — PC prices may remain at pre-Budget levels

PERSONAL computer prices are expected to remain virtually unchanged at the pre-Budget levels, with the Government on Monday announcing introduction of an additional duty on finished PC imports to neutralise the impact of the excise duty anomaly that had set in after the Budget 2004-05.

In a move that is expected to bring some relief to PC players — albeit not to consumers expecting a significant price drop — the Government has announced introduction of an additional duty under the Customs Tariff Act. As a result, a duty equivalent to that paid on the input parts and peripherals by a local PC manufacturer — Indian or MNC — would now be levied on import of finished computer.

The rate is seven per cent for a full system (CPU-box, monitor, keyboard and mouse) and six per cent for a CPU-box. The excise or countervailing duty (CVD) on inputs would continue to remain at 16 per cent.

In addition, to prepare the industry to meet the challenge of the zero duty regime in March 2005, the Government has abolished the customs duty on electro-mechanical parts like cabinets, key-switches etc. from five per cent, and on SMPS (power supply) from 10 per cent, to nil. This is to ensure that all inputs are also available at nil customs duty when the customs levy on finished products like PC, monitors and keyboard is completely phased out.

Welcoming the announcement, hardware association MAIT said that it would result in resolution of the impasse in the PC and peripherals manufacturing business, which had set in after the Union Budget 2004-05.

It may be recalled that in Union Budget, the excise/CVD on finished computers had been reduced from eight per cent to nil, while that on most input parts and peripherals (used in the manufacture of PCs) it continued to remain at 16 per cent. This had resulted in an inverted tariff structure, non- conducive to manufacturing, and the industry feared that it would make importing PCs more attractive instead. The measure had also confused consumers as they were expecting a significant price cut due to the announcement.

"The industry was, however, not in a position to do so, due to increased input costs as a result of the tax distortion. The business in the PC industry and market had come to a complete standstill." MAIT Executive Director, Mr Vinnie Mehta, said in a statement.

This anomaly is expected to be corrected with today's announcement of introduction of an additional duty on finished PC imports. For, in value terms, this would be equivalent to the excise/CVD that the local manufacturers are paying on input parts. In other words, it would establish a level playing field for the manufacturers.

The announcement, while bringing a relief to the industry is expected to come as a disappointment for the consumer.

According to MAIT, there will be practically no change in the prices of PCs, and they will continue to remain at the pre-Budget levels.

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