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The Union Budget 2016 brings hope to the domestic consumer durables and electronics industry. Various tax sops and duty cuts for intermediary products that have been announced will help boost local manufacturing and reduce import of finished goods to some extent. However, the FM did not remove the tax benefits that these products enjoy if imported from countries with whom India is in 'Free Trade Agreement' with. Duties on various items such as components for microwaves, LCD fabrication units, charger, battery, wired speaker, headsets, broadband modems, set-top boxes, CCTV camera have been got rid of. The reduction in duties such as special additional duty, countervailing duty and basic customs duty is in the range of four to 12.5 percent depending on the product category. Budget Provisions Imposed excise duty on articles of jewellery Imposed excise duty of 1% without input tax credit (ITC) or 12.5% with input tax credit' on articles of jewellery [excluding silver jewellery, other than studded with diamonds and some other precious stones], with a higher exemption and eligibility limits of Rs 6 crore and Rs 12 crore respectively. This is negative news for Jewellery companies like Titan Company, PC Jeweller. SAD imposed on PCBs for personal computers and mobile phone/tablet Exemption from Special Additional Duty (SAD) on populated Printed Circuit Boards (PCBs) for manufacture of personal computers (laptop or desktop) removed and increased to 4%. Exemption from SAD on populated PCBs of mobile phone/tablet computer being withdrawn. Concessional SAD on populated PCBs for manufacture of mobile phone/tablet computer imposed to 2%. The proposed 2% SAD on populated printed circuit boards (PCBs) used for making mobile phones, laptops and personal computers, a proposal that hasn't gone down well with handset makers that import this component for making phones locally. Excise duty on parts supply to mobile phone manufacturers increased Excise duty structure on domestically manufactured charger/adapter, battery and wired headsets/speakers for supply to mobile phone manufacturers as original equipment manufacturer being changed from Nil to 2% (without ITC) or 12.5% (with ITC) Prescribe actual user condition for imports of LCD/LED/OLED Panels Prescribe actual user condition for imports of LCD/LED/OLED Panels imported at Nil BCD for manufacture of LCD/LED/OLED TVs Exempt excise on solar lamp Solar lamp being exempt from excise duty of 12.5% which is good news for companies like Bajaj Electricals and Havell. BCD on E-Readers increased BCD on E-Readers increased from Nil to 7.5% while on parts of E-Readers being reduced to 5% Parts and components, subparts for manufacture of Routers, broadband Modems, Set-top boxes for gaining access to internet, set top boxes for TV, digital video recorder (DVR)/network video recorder (NVR), CCTV camera/IP camera, lithium ion battery [other than those for mobile handsets] being exempted. Microwave ovens made in the country will become cheaper as customs duty on a key imported component -- magnetron of capacity 1 KW to 1.5 KW -- has been brought down to NIL from 10 per cent earlier. Excise duty on rubber sheets reduced Excise duty on rubber sheets & resin rubber sheets for soles and heels being reduced from 12.5% to 6%. The abatement rate from retail sale price (RSP) for the purposes of RSP based assessment of excise duty, for all categories of footwear being revised from 25% to 30%. Stock to watch Titan Company, PC Jeweller, Videocon Industries, Havell, Bajaj Electricals, Panasonic Appliances India, HCL Infosystem, Videocon, MIRC, Bata Outlook Populated PCBs are roughly half the cost of a phone, and any increase in cost will get passed onto consumers. The impact will be on the negative side in the short term, as the cost of the components put together is about 35% for feature phones, compared to 10% in smart phones. Therefore, prices of feature phones may rise more than that of smart phones in the immediate future Pre Budget Expectations Cut excise duty on consumer appliances; incentivise local production Excise duty cut on consumer appliances is one of the key demands of the industry that is facing a fall in demand. The government had introduced excise duty sops for consumer durables in 2014, which were later rolled back. With the fall in rupee, the sector is eagerly awaiting a Budget that can stabilise the economy and give a boost to the struggling industry. A reduction in excise duty from 12% to 10 will bring relief. The Bureau of Energy Efficiency has been working towards stricter energy efficiency norms, which have also contributed to rising costs for the industry and rising prices for the consumers. As the energy efficiency norms are getting tightened, industry players are finding it challenging to make some of the five-star rated products in categories, such as frost-free refrigerators, as the cost is exorbitant. Leave higher disposable income with consumers The industry is hoping the Budget will lead to more disposable income in the hands of the consumers to spur consumption. Correct the inverted duty structure The industry is hoping that the government will remove inefficiencies in the system posed by the inverted duty structure. Industry players are urging the government to remove basic customs duty levied on import of components used to make appliances such as refrigerators, air-conditioners and washing machines. This will ensure a level playing field for the industry and encourage companies to manufacture appliances locally rather than import them into the country. Inter-state GST should be implemented prior to the full-fledged GST Section 80-I, investment allowance on capex should be without any lower threshold. Any increase in social welfare and bonus expenses may be allowed as a 300% weighted deduction for the purpose of tax calculations. In the interest of equity and fair play the onus for providing C Form for availing concessional tax on inter-state sales should shift to the purchaser from the supplier from retrospective effect. Rates of Custom Duties on various stages of production - from raw material to finished products may be finely differentiated allowing small breathing space to each of the value adder. A study could be commissioned to identify potential sectors and slabs to encourage such backward integration The duty drawback rates should be aligned with the custom duty on its raw materials and on calculated quantity based on input-output norms already established. The drawback mechanism should also incorporate the temporary anti-dumping / safe-guard duties levied from time to time. Exemption of 4% SAD has been granted on all inputs/components used in the manufacturing of all ITA-1 items (except Populated PCB's) CST on electronics value chain should be removed immediately as it is a major disincentive for domestic manufacturers. While the CST rate is 2%, the impact on the value chain is 5-6% due to its cascading effect LCD Panel FAB may be treated at par with Semi-Conductor Fab and should be offered similar benefits Zero duty on all inputs for manufacture of electronic components and parts, including dual use inputs for all ITA-1 items which results in inverted duty scenario. In addition to continuation of SAD, 5% Customs Duty should be imposed on fully assembled PCB Boards imported for manufacture of ITA-1 products and electronic equipment which is currently subject to Zero Customs Duty. To encourage domestic manufacturing of the entire value chain of ESDM industry, a duty differential of 6.5% (50% of Excise Duty) may be introduced. For all inputs of electronics industry, excise duty should be pegged at 6% (50% of the Tariff Rate) without CENVAT credit and 12.5% with CENVAT credit Similar to conventional lighting products, LED bulbs and Tubes should be assessed under sec 4(a) of the Central Excise Act, while other LED products that are largely used in commercial/industrial applications be exempted from MRP based valuations. Excise duty on stand-alone radio sets may be reduced to 8% (which is revenue neutral) and must be chargeable on ex-factory price. Presently, the Excise duty on this item is levied on MRP less abatement. To encourage manufacturers to make panels in India , the BLU modules, its parts and open cell should be allowed for import at a concessional custom duty of 0% without actual user condition. Customs Duty Exemption on inputs for Micro Fuses, Sub Miniature Fuses and Resettable Fuses Clarity with regards GST implementation Powered by Capital Market - Live News
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