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While presenting the Union Budget for 2014-15, Finance Minister Arun Jaitley acknowledged the long pending demand of the electronics industry to incentivise domestic production and "reduce dependence on imports."
Jaitley has imposed a basic customs duty of 10% on telecommunication products that are outside the purview of the Information Technology Agreement (ITA). ITA is a global trade agreement and electronics classified under it are exempt from import duty in all countries which are part of the ITA.
All components used in the manufacture of personal computers have been exempted from 4% special additional duty (SAD) and education cess has been imposed on imported electronic products "to provide parity between domestically produced goods and imported goods."
Moreover, 4% SAD has also been exempted on PVC sheet and ribbon used for the manufacture of smart cards. Also, cheaper cathode ray TVs which are used by weaker sections are being incentivised, and Jaitley has promised to encourage production of LCD and LED TVs below 19 inches in India by abolishing the 10% customs duty among other measures.
Several electronics industry bodies such as MAIT have been asking the government to plug the lacuna in the industry with respect to inverted duty structure to encourage manufacturing in India. Inverted duty structure makes importing electronics cheaper than manufacturing them in India.
According to government estimates, India's electronics import bill is expected to exceed that of oil by 2020, which makes it imperative to push manufacturing of electronics locally. Keeping this in view, the past government unveiled the National Electronics Policy in 2011 under which a slew of measures were launched to kickstart domestic production of electronics.
Jaitley also extended the investment-linked deduction for semiconductor wafer fabrication manufacturing units, which is expected to "boost investment" in this "critical" sector. The government has already approved two consortiums which will set up semi-conductor units in the country.
