ZERO DUTY SOP LIKELY FOR MANY IT COMPONENTS 

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By FROM JAYANTA ROY CHOWDHURY
  • Published 12.02.00
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New Delhi, Feb 12 :     The government is planning to move a large number of components and capital goods used by the IT hardware industry to the zero import duty list in this year's budget. The reason behind this move is that India has already moved forward its target date for bringing down the import duty on IT finished goods to zero from January 1, 2005 to January 1, 2003. The date may be further brought forward after negotiations with US and west European countries. A budget note on the issue says the benefit should be conceded in order to ensure the survival of the dwindling crop of IT hardware companies. "We will lose money by way of duty forgone by this measure. But if it is not done, then the flood of cheap imported hardware will kill the domestic industry totally," finance ministry officials said. Consequently, the revenue department in consultation with the Prime Minister's Office and the newly- formed information technology ministry is working on the list of IT components that can be imported without the payment of any duty. "This is likely to be huge as there are a number of small and micro components which are essential for manufacturing IT products," officials said. Many of these are components which will be used to build printed circuit boards, semiconductors, hybrid micro-circuits, cathode tubes, LED displays, and electron guns. As a corollary, the duty on intermediate products and finished goods will remain unchanged in this year's budget. This will be done to give IT hardware industry as much breathing time as possible within which to adjust to the coming zero duty regime. At the same time, as the entire IT hardware industry is import-intensive where prices and technology change at a fast pace, the commerce ministry has been asked to simplify procedures for import, licensing and inspection. Also on the cards is a proposal by which IT companies may be allowed fiscal benefits of export incentives without any specified export obligations. That is to say instead of any specific stipulation to export X percentage of the output, IT units will get the financial benefits due to an export unit. But this is still a controversial issue with several ministries including finance raising objections to it even though it has been cleared by the Prime Minister's task force on IT.