New Delhi: IT hardware body MAIT has asked the government to abolish the inverted duty structure on computer components, a move that will help revive the subdued demand and promote manufacturing in the country.
Besides, Special Additional Duty (SAD), Countervailing Duty (CVD) and Minimum Alternate Tax (MAT) increase the prices of the finished product, Manufacturers' Association for Information Technology (MAIT) has said in its pre-Budget memorandum to the Finance Ministry.
The total input duty on components like motherboards, cabinets and graphic cards is higher than the duty on finished product, meaning increased costs for producers and the end consumer, it added.
Under the inverted duty structure, finished goods are taxed at a lower rate than input components.
"The industry has experienced very nervous business environment in 2011-12. The year has been plagued by many problems like hard disk shortage, inverted tax structure and inflation accompanied with constant rupee devaluation.
"Even, the current fiscal is no better and witnessing a drastic fall in market demand, which calls for some aggressive action and support from the government," MAIT said.
Citing an example, the industry body said the parts like motherboards and cabinets are charged a countervailing duty of 12 percent.
Coupled with SAD of 4 percent, the duty stands at 16.85 percent against a duty of 12.36 percent on completely imported units.
MAIT had earlier projected a growth of 26 percent in PC sales for 2011-12, however, it grew 16 percent at 10.8 million units.
The body has also called for correction of double taxation in annual maintenance contracts.
MAIT also wants that Basic Customs Duty (BCD) exemption should be extended to accessories like adapters, battery, laptop carry bags and speakers. Presently, products like laptops and peripherals are exempted from BCD.
In order to maintain uniformity in sales tax rates applicable to the same products across the country, MAIT has asked the government to include Information Technology Agreement (ITA) products in the list of declared goods.
"Since IT product is not a declared good, each state is free to fix the VAT rates chargeable on sale of IT products, thus resulting in lack of uniformity in sales tax rate applicable to the same products in different states, it added.