Budget 2014: Arun Jaitley imposes tax on imports of telecom, IT products

NEW DELHI: In a move to give level-playing field to domestic electronics manufacturing sector, Finance Minister Arun Jaitley today imposed tax on imports telecom and IT products.

"To boost domestic production and reduce our dependence on imports I intend to take 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 Parliament.

India is signee of 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 covering telecom, computers and semiconductors like mobile phones and electronic chips.

"The Government signed ITA 1 on 25th March 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," Telecom Equipment Manufacturers Association Chairman Emeritus NK Goyal said.

He added that the Budget gives a positive signal that while India will meet all its WTO commitments and will also support domestic manufacturing.

The move is expected to encourage production of VoIP phones and some telecom network equipments for which demand is increasing with rapid change in technology.

While ITA allowed import of finished product duty free, domestic manufacturers paid taxes on import of components used for making a complete unit which made indigenous production of electronic products expensive and wiped out almost entire hardware production in India.

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

Industry bodies linked to electronics manufacturing hailed measures announced in the Budget.

"While this is a welcome step as it will encourage telecom products manufacturing, 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," ELCINA President Subhash Goyal said.

The Finance Minister exempted import of colour picture tubes to boost local production of finished products like old models of colour television, technically known as cathode ray TVs (CRT), which cost less compared to flat panel TVs (FPT).

"Cathode ray TVs are used by weaker sections who cannot afford to buy more expensive flat panel TVs. I propose to exempt colour picture tubes from basic customs duty to make cathode ray TVs cheaper," Jaitley said.