Budget 2014—Tax on imports of telecom, IT products may reduce dependence on imports

Telecom Equipment

Telecom EquipmentFriday, July 11, 2014: To give a level-playing field to domestic electronics manufacturers, Finance Minister Arun Jaitley imposed tax on imports of some telecom and IT products. “To boost domestic production and reduce our dependence on imports I intend to take the following steps: Impose basic customs duty (BCD) of 10 per cent on import of specified telecommunication products that are outside the purview of information technology agreement,” Jaitley said in his Budget speech.

The Jaitley proposed to “exempt all inputs/ components used in the manufacture of personal computers from 4 per cent special additional duty (SAD)” and “Impose education cess on imported electronic products to provide parity between domestically produced goods and imported goods.”

India is a signee to Information Technology Agreement 1 as a member of World Trade Organisation. Under ITA 1 agreement, member countries should allow duty free import of products falling under eight categories including telecom, computers and semiconductors.

Says NK Goyal, chairman emeritus, Telecom Equipment Manufacturers Association, “The government signed ITA 1 on in 1997 and committed import of duty free on 217 items. However, several items which were not covered under ITA 1, were also imported duty free. So now this has been corrected by levy of import duty on non ITA-1 items.”

This initiative will encourage production of VoIP phones and some telecom network equipment for which demand is increasing.

According to ELCINA president Subhash Goyal, this step will encourage telecom products manufacturing. “However, it is not clear why SAD has not been removed from all electronic components and ICT products. SAD is a regressive tax and does not serve any purpose. SAD should be removed from all electronic components and ICT equipments,” Subhash Goyal said.