CII moots 5% customs duty on imported STBs in bid to boost local manufacture

NEW DELHI: While demanding various reductions and exemptions of taxes and duties that would be beneficial for the media and broadcasting industry in general, the Confederation of Indian Industry (CII) has demanded a hike in customs duty on STBs from the present nil to 5 per cent.

The CII has demanded exemptions and tax burden relief on capital goods import and other issues, especially those meant for infrastructure development, creation of intellectual property and import of colour TV and picture tubes.

Yet, so far as STBs are concerned, the CII says that whereas in the present situation, import of STBs do not attract any customs duty, this should be raised to five per cent in the budget for 2007.

The CII, in its document “Pre-Budget Memorandum” gives its own arguments on that count.

It says: “Excise Duty on STBs was exempted on 24th June 2003 to facilitate introduction of Conditional Access System in the country. In the budget 2006, the exemption on excise duty was withdrawn but customs duty was reduced from 15 per cent to Nil. However, there was no corresponding reduction of customs duty on inputs used in the manufacturing of STBs. This has resulted into another case of inverted customs duty structure.

“The correction of the anomaly can be achieved either the by reduction of customs duty on inputs required for manufacturing of STBs to Nil, or increasing of customs duty on the import of STBs from Nil to 5 per cent, and also allowing import of inputs at five per cent.”

A senior tax consultant told indiantelevision.com that the measure would benefit local manufacture of STBs, as the customs duty on import of boxes and import of input components would be the same, whereas previously, there was no customs duty on import to STBs.

Currently, MSOs are importing STBs mainly from China and Korea.

“This is a pro-local manufacturing and necessary corrective measure from an earlier skewed customs regime so far as STBs are concerned,” he explained.

The CII recommendation says that the second option is preferable.

It says also: “In case it is felt that it would increase the price of imported STBs, then excise duty can be reduced from 16 per cent to 12 per cent on STBs as well as its major imported inputs.

Meanwhile, there are many general recommendations of the CII that would benefit the industry.

It has specifically suggested that the customs duty on glass parts of the colour picture tubes for TV sets should be reduced from 12.5 per cent to five per cent.

It has argued here that the Free Trade Agreement between India and Thailand has a list of goods covered by the Early Harvest Scheme and includes CTV and colour picture tubes.

“Consequently, customs duty on CTV (8528 12) and CPT (8540 11) imported from Thailand was reduced to 12 per cent on September 2004, and to 6.25 per cent on September 1, 2005. The impact of (this) reduction has resulted in tremendous increase of imports (from Thailand).

On the telecom sector the CII has recommended that there should be a reduction of customs duty to five per cent on capital goods required for manufacture of telecommunication equipment covered by the IT agreement.

It also wants to extend the present “Nil” customs concession to inputs for the manufacture of components / sub assemblies duty under serial number 239 of customs notification 21/2002.

Across the board, CII has recommended measures that will benefit industry as a whole and consequently the media and broadcasting industry. It has, for instance, recommended reduction of CENVAT rate of 16 per cent to 14 per cent in the budget 2007, and has also said that the service tax of 12 per cent must not be increased.

On the issue of infrastructure development CII has suggested that the government may consider more loans from international institutions.

“Gross Capital Formation in infrastructure must be progressively raised from 4.5 per cent of GDP to 11 per cent,” the report of CII says.

In general, all companies and employees may stand to benefit also if the CII recommendation of abolishing of Fringe Benefit Tax (FBT), in consonance with the desires of business as a whole, ever since the tax was slapped vide the Finance Act 2005.

It outlines the alternative thus:

“Either the tax should be abolished or the choice be given to tax paying firms to pay one per cent additional corporate tax on its total income in lieu of FBT. Otherwise the corporate could chose to remain under FBT. If this is not possible, the CII proposes levy of FBT only on elements of personal benefit to employees, and exclusion of deeming provision of treating a portion of pure business expenses as personal expenses.”

The CII recommendation on depreciation would also benefit the media and broadcasting industry.

Stating that it is well known that technology is changing fast, “and unless we are able to replace our assets fast, we cannot match with other countries in terms of productivity, CII has recommended that depreciation rate be raised from 15 per cent to 25 per cent, as was the case earlier, provided the rate charged under Income Tax is the same or higher than charged under the Companies Act.

Development of infrastructure would also benefit from the industry body recommendation that the Minimum Alternative Tax is abolished. If it is not, CII feels, it should at least be removed for infrastructure companies in order to promote development and to motivate the private investor to come into this sector.