Nil duty on equipment for wafer fabrication

The increase in the import duty on set top boxes (STB) is a “welcome step,” according to the President of the Indian Electronics and Semiconductor Association (IESA) P.V.G. Menon. He said the industry is likely to benefit because the demand for STBs over the next 2-3 years is likely to be at least 100 million units. The increase in duty will end the unfair advantage imported STBs have been getting for so long, Mr. Menon said.

An industry source said the move ought to have a positive impact unless cheap Chinese STBs flooded the Indian market before April 1, which is when the new duty rate takes effect. “Indian electronics manufacturers suffer from a disability of about 30 per cent, mainly because of the high domestic tax rates and high cost of capital,” Mr. Menon said.

Mr. Menon also welcomed the move to introduce a nil rate of import duty on equipment that may be used establishing a wafer fabrication unit, which, Mr. Menon pointed out, is highly capital intensive. The electronics industry will also benefit from the 15 per cent increase in investment allowance. However, Mr. Menon told The Hindu that the increase in excise duty on mobile phones costing more than Rs. 2,000 “is a blow” to domestic manufacturers of handsets.

“What the Finance Minister has done for mobile phones contradicts what has been done in the case of STBs,” Mr. Menon quipped.

Mobiles to become costlier

If you are planning to buy a mobile phone, better buy it now as the Union Finance Minister has hiked the duty on handsets costing above Rs.2,000 from one per cent to six per cent from April, based on their maximum retail price.

Though most of the users opt for high-end mobiles of branded companies, a majority of the new comers prefer to buy mobile costing less than Rs.2,000 to have a feel of it before migrating to mobile costing over Rs.5,000. Reacting to the budget proposal, Nokia India Vice-President and Managing Director P. Balaji said it would lead to increase in the sale of grey, unbranded sub-standard handsets.

While welcoming the government’s decision to retain concessional excise duty of one per cent in the sub-Rs.2,000 category, he requested the Union Finance Minister to roll back excise duty increase on mobile phones beyond Rs.2,000 as hand phones are the primary mode of access to information and services for the youth and non-urban consumers.

Samsung Mobile, Vice-President, Asim Warsi, said the increase in the excise duty on mobile phones would impact on the prices of high-end smart phones.