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CEAMA

2013-14 BUDGET RECOMMENDATIONS


CONSUMER ELECTRONICS AND APPLIANCES MANUFACTURERS ASSOCIATION
29 November 2012 1 2013-14 UNION BUDGET RECOMMENDATIONS
PRESENTATION TO
DEPARTMENT OF REVENUE
MINISTRY OF FINANCE
NOVEMBER 29, 2012
CEAMA
INTRODUCTION
Consumer Electronics and Appliances Manufacturers Association (CEAMA), is an all-
India organization in the Consumer Electronics and Durables sector, looking after the
common interest of the members, for sustainable growth and profitability. It has been
in existence for last 33 years and has approximately 100 members.
Members comprise of national and multinational companies and includes large,
medium and small-scale sectors. LG, Samsung, Videocon, Panasonic, Philips, Haier,
Godrej, Whirlpool, Onida, IFB, Lloyd, Sharp, TCL, Onkyo are some of our members.
The sector Consumer Durables play an important role in the economy of the nation.
Contributes >5.5% to the IIP. It is an employment intensive sector.
For every 1 direct job in this space, ~ 3 indirect jobs are created.
This sector has been the engine of economic growth for Japan post-WWII, South Korea
China and S E Asia have benefitted equally in later decades.
Considering the low levels of penetration of Consumer Durables, this sector has
immense growth potential and job creating opportunities.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 2
CEAMA
BUDGET RECOMMENDATIONS
1. Customs
2. Central Excise
3. Service Tax
4. Miscellaneous
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 3
CEAMA
2013-14 BUDGET
RECOMMENDATIONS
CEAMA
RECOMMENDATIONS ON CUSTOMS DUTIES
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 4
CEAMA
REDUCTION OF DUTY FOR LCD & LED TV PANELS <19 & INCLUSION
OF PLASMA PANEL
Notification No. 31/2012-Customs dated 8
th
March 2012, exempts panels for LCD/LED
TVs of =>19 from Customs Duty.
Industry had requested exemption of duty on panels of all sizes i.e. even < 19.
The sizes of LCD/LED CTV < 19 will see robust demand in the mass segment due to
lower price points.
Some of our members are now planning to manufacture Plasma TV, which so far was
only imported.
RECOMMENDATION: To favorably consider modifying the notification from 19 inches
& above LCD/LED panels to LCD/LED & Plasma panels of all sizes.
REVENUE IMPLICATION: Negligible as presently there is little import of panels <19 &
of Plasma Panels.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 5
1
CEAMA
IMPORT DUTY ON SET TOP BOX
Digitalization of TV will create huge demand for Set Top Boxes in the country. likely to
touch 20 M units per annum. Current demand met by imports.
Indian manufacturers face huge disability factors; future demand will favor imports
unless the playing field is leveled.
The disability factor is in 12.5% VAT applicable to Indian manufacturers as Cable & DTH
operators do not provide them C Form since they lease (and not sell) boxes. Further,
importers do not pay any VAT.
Inverted Duty on Set Top Boxes is an additional hindrance.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 6
2
Input for Set Top Boxes Customs Duty
AV Cable 7.5%
RCA Jack 7.5%
Tack Switch 7.5%
USB Cable 7.5%
Smart Card Holder 10.0%
CEAMA
RECOMMENDATION: We strongly recommend Customs Duty on Set Top Boxes be
increased to 10% (currently 5%) for at least two years, to encourage local
manufacturing
REVENUE IMPLICATIONS.A GAIN OF RS 83.0 Cr
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 7
THE INDUSTRY IS IN INFANCY STAGE AND NEEDS PROTECTION FOR AT LEAST TWO YEARS
Estimated STB imports in 2013-14 Cable
DTH
17.5 M
7.5 M
Price Cable
DTH
$ 17.0
$ 25.0
Current import volume Cable
DTH
90%
60%
Import volume with 10% import duty Cable
DTH
70%
50%
Revenue Gain Cable: 17x55x.05x17.5x.7x10
6
DTH: 25x55x.05x7.5x.5x10
6
Rs 57.2 Cr
Rs 25.8 Cr
CEAMA
SAD LEVIED U/S 3 (5) OF CTA BE ABOLISHED
Manufacturers selling parts & components, post imports, have to undergo a time
consuming and cumbersome Refund process for recovering Special Additional duty
(SAD) allowed under NotIfication 102/97.. takes ~9-12 months leading to high
transaction cost.
RECOMMENDATION: SAD levy may be removed as it does not generate any revenue for
the Govt. For traders, SAD is exempted and for manufacturers CENVAT credit available.
Moreover, this is adding to transaction cost of companies.
Removal of SAD will not only result in cost saving for Industry but also manpower
saving for the Government. Alternatively, the current SAD exemption Notification
21/2012 Sr 2 should be amended to include exemption for bulk and institutional sale.
REVENUE IMPLICATION: Negligible, as CENVAT / refund is allowed.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 8
3
CEAMA
DUTY REDUCTION ON PROJECT IMPORT FROM 5% TO 0%
At present, project imports attract 5% BCD as against 7.5% otherwise. The process of
registration and compliance is lengthy because of which companies are unwilling to
avail this benefit. Moreover, customs duty gap is only 2.5%, as against stringent
compliance. Thus there is practically no incentive for new projects/investments.
Customs duty under project imports should be 0% for our sector. This will enhance
manufacturing set-ups and will invite new technologies/investments into India,
furthering the objective of making it a manufacturing hub and creating new
employment opportunities.
REVENUE IMPLICATION: Total project imports for sector estimated at Rs. 500 Cr. The
loss would be Rs. 25 Cr.
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(UNDER CHAPTER 98 OF CTA)
CEAMA
DUTY REDUCTION ON R&D IMPORTS.. FROM 5% TO 0%
Currently R&D units registered with the MOS&T can avail reduced BCD of 5% on
complying with conditions laid down in Notification 51/96.
RECOMMENDATION: Customs Duty for R&D items should be 0% to promote R&D in
India, especially for Electronics, Air Conditioning and Refrigeration industry, where the
growth potential is high. This will invite more R&D set-ups in addition to technological
advancement and more innovative Indian products.
REVENUE IMPLICATION: Total R&D investment for sector ~Rs.150 Cr. Loss would be
~Rs7.5 Cr.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 10
5
(NOTIFICATION CUS. 51/96)
CEAMA
DUTY CONCESSION ON MANUFACTURING OZONE FRIENDLY
PRODUCTS BY INDIAN MANUFACTURERS
Currently Customs Duty exemptions are for import of machineries designed exclusively
for Non-ODS Technology but Parts, Components and Spares do not have customs duty
exemptions.
RECOMMENDATION: Customs duty relaxation ought to be allowed on Parts,
Components and Spares for manufacturers who adopt Non-ODS technology in
manufacturing.
This will incentivize manufacturers who have to invest huge amounts to change
technology from current practices to Ozone friendly ones and invite more Non-ODS
technology in India, which could open up the markets for Exports.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 11
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CEAMA
DUTY REDUCTION ON IMPORT OF MAGNETRON (HSN: 85407100)
AND OTHER INPUTS FOR MICROWAVE OVENS (HSN : 85407100)
In the 2010-11 Budget, Customs Duty on magnetron was reduced to 5% under IGCR
condition. Companies who import components contract manufacture cannot claim this
benefit ; they are liable to pay 10% Basic Customs Duty.
Most companies import Microwave Ovens as CBU from SEA at under India-ASEAN FTA
with duty that will be 2.5% effective January 2013. Only one company is manufacturing
in India. The major parts which have a customs duty of 7.5 /10.0 % are listed below:-
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 12
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(NOTFN CUS 12/2012 SR NO.433)
Sl.
No.
Description HSN Present Customs Duty CIF Import
(Rs Cr.)
Customs Duty
(Rs Cr.)
1. Magnetron 85407100 5% under IGCR
otherwise 10%
12.79 1.27
2. High Voltage Transformer (HTV) 85043200 10% 10.5 1.05
3. Glass Tray 70139900 10% 1.20 0.11
4. Door Assy 85169000 10% 11.25 1.12
5. Controller Assy 85169000 10% 8.75 0.87
6. Motors 85011019 7.50% 3.28 0.30
CEAMA
RECOMMENDATION: Customs Duty on Magnetron & other items listed should be 0%
without IGCR condition. These components the essential & high value parts of
Microwave Ovens, which are not made in India and unlikely to come up in near future
due to high cost of investment for the current size of market
REVENUE IMPLICATION: Loss is Rs 4.7 Cr. However, it would lead to employment
generation in the country.
These items are exclusive for Microwave Ovens, hence there is no chance of them being
misused. Reduction of Duty will encourage more companies to manufacturing
Microwaves in the country and will be able to tap export potentials.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 13
CEAMA
DUTY REDUCTION ON HIGH TECHNOLOGY MACHINES AND
EQUIPMENTS IMPORTED BY INDIAN MANUFACTURERS
Currently these machines attract 7.5% BCD as against a peak tariff of 10%. No special
benefit of customs duty is available for high technology machines.
RECOMMENDATION: Basic Duty on these items should be reduced to zero percent to
promote new technology in India. This will also lead to innovative, high quality Indian
products and open up export markets.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 14
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CEAMA
CLARIFICATION TO NOTFN NO 12/2012 SR. 432 ON LCD PANEL/
MODULES
LCD TV manufacturers are importing LCD Panel/Module which is an essential and vital
part for LCD/LED TV.
MoF has considered the recommendation of CEAMA and customs duty on the same is
0% under Notfification # 12/2012 Sr 432.
There is large scale ambiguity as some of the manufacturers call the items LCD Panel
and others LCD Module. Irrespective of nomenclature, all Panels consist of Liquid
Crystal Display. At various ports, Customs has interdicted the consignments as the
notification only mention LCD Panels.
RECOMMENDATION: MOF issues clarification to Notification # 12/2012 Sr 432 to the
effect that LCD Panel/Module is the same product. Also, since there is no
manufacturing of this part in India, all such LCD Panel/ Module should be exempt from
duty.
REVENUE IMPLICATION : Nil
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 15
9
CEAMA
INVERTED DUTY STRUCTURE DUE TO FTAS MAKING INDIAN
MANUFACTURING UNCOMPETITIVE
Finished goods are allowed to be imported from countries under FTA at zero duty. For
example, India-Thailand FTA covers Colour Television, LCD TV, PDP TV, Air Conditioners,
Refrigerators etc., which can be imported under 0% Basic Customs Duty vide
Notification Cus 85/2004.
Companies who import components of these items at peak rate of duty for
manufacture are unable to meet competition of cheap imports. The major parts which
have a customs duty of 7.5 /10 % are list below:-
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S.NO. DESCRIPTION HSN PRESENT CUSTOMS DUTY
1. Clutch Assembly for WM 84509010 10%
2. Motor for AC & Ref 85011020 7.5%
3. Sensor for AC & Ref 84189900 10%
4. Timer for WM 91070000 10%
6. Pre printed Steel Sheet (PCM/VCM) 85011019 7.5%
CEAMA
RECOMMENDATION: We recommend that MOF should take suitable action to remove
the inverted duty structure on Consumer Electronics and Appliances. Alternatively the
customs duty for parts and components listed above should be put under 0% Basic
customs duty.
REVENUE IMPLICATION: Rough estimates indicate it to be ~Rs.200 Cr.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 17
CEAMA
MISCELLANEOUS RECOMMENDATIONS RELATED TO
IMPORTS - EXPORTS
Advance Customs Clearance - Should be introduced wherein importers can clear the
goods a week before and take delivery of the goods immediately on arrival. Post
delivery of the goods, IGM should be linked with the B/E and closed in customs system.
This facility should be either extended to all or importers holding special status like AEO
and ACP.
Fast Track Litigation Settlements - Suggest a single window should be introduced for
fast track settlement of small litigations, demands, SCN etc, which could result in
settlement of large number of dispute in minimum time, thereby saving huge time and
money for industry and government.
Reduction In Air Freight Percentage For Calculation Of Customs Duty - Currently it is
20% of FOB value of imports, which is on the higher side comparing actual
transportation cost and should be reduced to 6%.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 18
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CEAMA
MISCELLANEOUS RECOMMENDATIONS RELATED TO IMPORTS
EXPORTS.CONTD
Removal of Unjust Enrichment Clause: Industry is forced to comply with the unjust
enrichment clause for all refunds, even for low value refunds. The unjust enrichment
condition should be removed for refunds below Rs 5 L.
On Line Customs Assistance to Trade: An on-line Customs facilitation should be
introduced which can guide industry on matters such as Import-Export regulations,
Import-Export duty rates, classifications, etc.
Import of Commercial Items in Baggage: Import of commercial items in personal
baggage should be allowed for large manufacturers to meet contingencies like critical
spare parts for repairs, production shortages etc. on payment of applicable customs
duty.
Single Window Facilitation: Large importers and exporters holding ACP & AEO status
should have single window facilitation for all customs matters. Priority should also be
extended to such importers for issue settlement and clarification in MoF. Currently all
importers are given RMS under self assessment scheme and special status importers do
not get any additional facilitation.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 19
CEAMA
FINANCIAL IMPLICATION OF CUSTOMS RECOMMENDATIONS
Recommendation
Revenue
Gain
Revenue
Loss
Neutral
Not
Estimated
Duty Reduction on <19 panels
Higher import Duty on STB 83.0
Abolishing SAD
Duty Reduction on Project Imports 25.0
Duty Reduction on R&D 7.5
Duty concession for Ozone Friendly Products
Duty Reduction on Magnetrons 4.7
Duty Reduction on Hi Tech Machines
Clarifications on Notifications on LCD/LED panels
Correction of inverted duty structure of FTA countries 200.0
83.0 236.9
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 20
Net Loss: Rs 153.9 Cr
Figures in Rs Cr
CEAMA
2013-14 BUDGET
RECOMMENDATIONS
CEAMA
RECOMMENDATIONS ON CENTRAL EXCISE
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 21
CEAMA
REDUCTION OF DUTY ON 14 COLOR TELEVISION (HSN : 85281211) AND
14 COLOR PICTURE TUBE (HSN : 854011) TO 5%
Excise duty on 14" CTV is the same as on CTV of sizes 21"/Ultra Slim as well as LCD &
LED of all sizes. Demand for such TVs is now only in rural markets or lower income
groups. As such, duty on 14" CTVs need special consideration. There are many MSMEs
who manufacture such TV sourcing Colour Picture Tubes (CPT) from two Industrial
units. The MSME TV units are on the verge of closing down and CPT units are also sick.
If these close down, it will render many persons unemployed.
RECOMMENDATION: Excise Duty should be brought to 5%. This will provide a new
lease of life to SME TV Units & CPTs manufacturers, thus avoiding large scale
unemployment.
REVENUE IMPLICATION: Market for 14 CRT TV is projected to be 2.0 M in 2013-14
with an average price of Rs. 4,000. Loss of revenue would be ~ Rs 35 Cr.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 22
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CEAMA
EXCESS CREDIT OF CENVAT SHOULD BE ALLOWED AS REFUND
There is no provision to get refund of accumulated CENVAT credit as per Rule 3 of CCR
2004. Manufacturers are facing problems for CENVAT accumulation because of levy of
SAD , flow of input services and lower value addition in product profile.
Since the accumulated CENVAT is nothing but prepaid tax, refund of the same should
be allowed after making necessary amendment in the rule. This will lead to increased
financial health & cash flow of manufacturers.
REVENUE IMPLICATION: Industrial units in the sector are estimated to have a unused
CENVAT credit of about Rs. 200 Cr
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 23
2
CEAMA
CENVAT CREDIT ON CAPITAL GOODS
CENVAT Credit in respect of Capital Goods received in factory in a given financial year is
only 50% and 50% is deferred to next financial year, as per Rule 4 of CCR 2004.
RECOMMENDATION: 100% credit should be allowed Year 1 itself. This will help save
transaction cost.
REVENUE IMPLICATION: In our sector, approximately Rs. 30 Cr is deferred to the next
financial year.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 24
3
CEAMA
EXCISE DUTY CONCESSION ON MANUFACTURING ENERGY EFFICIENT
PRODUCTS
AIR CONDITIONERS (HSN : 841510) REFRIGERATORS (HSN : 841810)
There are no additional benefits for manufacturing Energy Efficient products. Our
country is energy deficient. Energy conservation is vital and government should provide
incentives for manufacturing energy efficient products, particularly high energy
consuming categories such as Air-Conditioner & Refrigerator. Presently 25% of
Refrigerators & 10% of Air-Conditioners have 5 Star rating.
RECOMMENDATION: Excise duty relaxation should be allowed on manufacturing of 5
star rated Air-conditioners & Refrigerators & their compressors ( 841430 & 841480), to
5%. This will encourage manufacturing of more energy efficient products in India at a
time when energy standards are undergoing a severe upward revision.
REVENUE IMPLICATION:
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 25
4
Refrigerators
(Market 10 M/ Av Price Rs 7,000)
10x.25x7000x.06 Rs 105 Cr
Air Conditioners
Market 4 M/Av Price Rs 20,000
4x20000x.1x.06 Rs 48 Cr
CEAMA
REVERSAL OF CENVAT CREDIT ON CAPITAL GOODS CLEARED
As technology in our sector changes rapidly and rate of technological obsolescence is
high, the life span of many Capital Goods like moulds and dies are not more than 5
years. In such cases effective duty credit available is only 40 to 50%.
RECOMMENDATION:
1. Effective life of Capital Goods should be reduced to 5 years from current 10 years, at
least for sector such as electronics, where technological changes are rapid.
2. For removal of Capital goods as waste & scrap, CENVAT credit taken should be
reduced by prescribed percentage or on transaction value whichever is higher as per
Rule 3 (5A) of CCR Rule 2004.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 26
5
CEAMA
INCREASE IN THE ABATEMENT RATE FOR MRP BASED EXCISE DUTY ON
CONSUMER DURABLES
Consumer Durables attract MRP-based valuation under Sec 4(A) of the Central Excise
Act, 1944. The current level of the Abatement is as under:-
The increase in Excise Duty from 10% to 12% has adversely affected industry that is
already impacted by inflation in commodity and low demand.
Though MRP forms the basis of Excise Duty valuation, in real terms the product is never
sold at MRP but at a discount to the MRP. Hence from a manufacturer/importer point
of view, while excise duty is being paid on higher value, sale is transacted at lower rate.
As a result, full value realization does not happen. Increase in abatement rate will
ensure that the product is taxed at a price closer to the realized price level by the
manufacturer/importer.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 27
6
Sr. No. Description of Goods Abatement
1. Air Conditioner 35%
2. LCD Television 35%
3. Refrigerator 35%
CEAMA
This is also in line with the valuation principle propagated by the Excise Law, wherein it
is stated that the Excise Duty is chargeable on the assessable value, i.e. value realized
by the manufacturer in an arms-length transaction.
To save the Home Appliances manufacturers from significant losses, it is suggested that
the MRP based assessment for Consumer Electronics & Home Appliances products
should be increased to 40% from the current level.
REVENUE IMPLICATION:
Total Turnover Rs. 25,000 Cr
Increase in Abatement would reduce Excise Duty by 0.6%
Revenue loss would be Rs. 150 Cr
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 28
CEAMA
FINANCIAL IMPLICATION OF EXCISE RECOMMENDATIONS
Recommendation
Revenue
Gain
Revenue
Loss
Neutral
Not
Estimated
Duty Reduction on 14 CTVs and CPTs 35.0
Excess Credit of CENVAT as Refund 200.0
CENVAT Credit on Capital Goods 30.0
Duty Reduction on Energy Efficient Products 153.0
Reversal of CENVAT on Capital Goods Cleared
Increase in Abatement Rate 150.0
568.0
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 29
Figures in Rs Cr
CEAMA
2013-14 BUDGET
RECOMMENDATIONS
CEAMA
RECOMMENDATIONS ON SERVICE TAX
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 30
CEAMA
REMOVAL OF DOMESTIC REVERSE CHARGE MECHANISM
Approximately 10 services are notified under reverse charge, by which either full or
partial liability of service tax is shifted to service receiver. Shifting of liability on service
receiver is a paid point to tax payers.
RECOMMENDATION: Either reverse mechanism should be removed OR partial reverse
charge should be converted into full reverse charge to avoid the mistakes in huge
business operations. This will lead to increased operational efficiency and correct tax
remittances.
Current exemption of 10 Lac to small service provider is not available to service
receivers in case of reverse charge methods.
RECOMMENDATION: Exemption should be extended to service receivers also.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 31
1
EXEMPTION OF SERVICE TAX ON SSI LIMIT OF 10 L
2
CEAMA
TRANSACTION BETWEEN EMPLOYER TO EMPLOYEE SHOULD BE
EXEMPTED SERVICES
From 1
st
July12, all services are taxable except services which fall under negative list
and exempted services. Services with respect to Employee to Employer is covered by
exemption notification but services with respect to Employer to Employee is not
covered by exemption notification, if the employer make partial or full deduction from
employee like canteen, bus subsidy etc.
RECOMMENDATION: Services in relation to Employer to Employee should also be
exempted from payment of service tax.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 32
3
CEAMA
2013-14 BUDGET
RECOMMENDATIONS
CEAMA
MISCELLANEOUS RECOMMENDATIONS
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 33
CEAMA
VAT APPLICABLE ON SET TOP BOX GIVEN TO CUSTOMERS
(LEASE OR SALE UNDER RIGHT TO USE)
It is expected that over the next 3 years, there will be a demand of almost 150 M
subscriptions to DTH through Digital Set Top Boxes. At present, 90% of this demand is
being met through imports ex-China. This is despite availability of large capacities (~50
M) for manufacturing Set Top Boxes in the country.
DTH/Cable operators, who provide content to subscribers through a Set Top Box, pay
Service Tax only on the content provided and not on the Set-Top Box which is packaged
as installation/activation charge, with tax being charged on installation alone.
They are therefore unable to issue Form C, making the landed cost of locally
manufactured products more expensive since Indian manufactures have to pay CST
equivalent to local VAT (which is 12.5% without `C form).
RECOMMENDATION: The facility provided to Telecommunication Network for issuing
Form C should be extended to Set Top Box also.
REVENUE IMPLICATION: The state governments would garner additional revenue
through CST against the present status which is nil.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 34
1
CEAMA
CONCESSIONAL RATE OF INTEREST ON LOAN FOR PURCHASE OF
CONSUMER ELECTRONICS & HOME APPLIANCES, PARTICULARLY IN RURAL AREAS
Consumer Electronics and Home Appliances enhances the quality of life millions of
households and contributes > Rs. 10,000 Cr to the Union & State exchequers. This
sector is facing a slowdown in demand and hence underutilization of manufacturing
capacity by ~ 50%. High interest rates is one reason for slowdown of demand . RBI
estimates a 20% fall in consumer durable loans H1 of 2012-13. About 15% of purchases
of Consumer Durables (substantial part is in rural/small towns) is against financing by
Banks/NBFCs. To ensure that the industrial units, particularly small and medium units,
do not close down due to the sluggish demand thereby making thousands of people
un-employed, there is a need to take steps for the revival of the industry.
RECOMMENDATION: Since mass consumer durable products such as CRT TVs / small
LCD TVs, washing machines and refrigerators are bought by lower middle income
groups, interest on durable loans should be lowered to 9%, as a special case.
REVENUE IMPLICATION: Considering a turnover of our sector as Rs. 40,000 crore and
taking 15% of the sale is on Finance, a reduction of 1% interest would result in a
financial outgo of Rs. 60 crore. It would be made up to some extent with Increased
demand.
29 November 2012 2013-14 UNION BUDGET RECOMMENDATIONS 35
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