Telecom gear makers want inverted duty rectified

Indian telecom equipment manufacturers have demanded that the government address the disparity in taxes and duty between locally manufactured and imported equipment in the Budget.

According to NK Goyal, president Telecom Equipment Manufacturers Association of India (TEMA), while local manufacturers paid two per cent educational cess on their customs, excise and sales taxes, this was not imposed on finished telecom products. "The government should address this in the budget," he said.

TEMA, the umbrella body of manufacturers has also demanded that government act immediately on the differential excise duty.

Local manufacturers contend that while they are charged excise duty on the maximum retail price, for imported equipment the counterveiling duty is charged only on CIF price.

"Take the case of computers - the government has allowed 35 per cent abatement for payment of excise duty. Local manufacturers of telecom equipment too want parity for levy of duty on imports," said Goyal.

Sales tax too has been on the TEMA list of demands as this is not imposed on finished (imported) products. The inverted tax structure is another issues that local manufacturers want the budget to address.

Explains Sanjay Agarwal, CEO, Paramount Communications: "When there can be zero per cent duty on imports of finished products from 1 March, local manufacturers too must be treated on a par. For the manufacture of cables, we are subjected to between 15 - 20 duty on Copper and Plastic. Zero duty must be extended to all materials that are required by telecom manufacturers."

From December 31, import duty on all materials required for the manufacture of static converters have been abolished.

While welcoming the directive on static converters as it is a key component in all Telecom and IT equipment, manufacturers want the government to move further. "This should be extended to all other telecom equipments," added Agarwal.

"Indian manufacturing has matured, but we need a level-playing field, says Shirish B Purohit, CEO, Midas Communications, which exports CDMA equipment to more than 15 companies. "Taxation in India is lesser on imported products, he adds.

Manufacturers also want clarity on VAT. Industry executives are of the view that Indian manufacturers are likely to be charged 12.5 per cent under VAT.

"It is unlikely that the state governments will impose VAT on imports. We want parity on this, vis-a-vis imports and locally manufactured equipment," said an industry executive.