Pre-budget: MAIT recommends reforms to vitalize manufacturing in India

The association calls for faster clearances and streamlining of procedures to improve the conditions for doing business in India

MAIT, the apex body representing IT manufacturers, has outlined a set of reforms needed to

improve the business environment for IT manufacturing and to push India’s overall position in the

world market in terms of the ‘Ease of Doing Business’ index.

According to the World Bank’s Doing Business 2016 data released recently, India currently stands

at #130, which is way below China at #90.

MAIT has highlighted certain complexities in existing procedures that are creating bottlenecks for

IT manufacturers in conducting their business effectively.

Mr Anwar Shirpurwala, Executive Director, MAIT says, “At present there are multiple regulatory

and operational issues plaguing the Indian manufacturing sector, and the IT hardware industry in

particular. If the government is serious about campaigns like ‘Make in India’ these issues will have

to be resolved quickly. The business environment in India has to be improved and brought at par

with other countries.”

As part of MAIT’s Pre-budget Recommendations, shared with the media, the following key reforms

have been suggested by the association to ease the business environment for the IT manufacturing

sector:

Reduce time taken for customs clearances: This could be done by extending the green

channel facility for free movement of goods pertaining to R&D shipments; encouraging hand

carriage of goods with provision for monthly customs duty payment facility; relaxation of

mandatory first check processes at the ports pertaining to free of charge/ exempted shipments;

and avoiding Special Valuation Branch (SVB) inspections for goods that are already cleared under

duty exemption schemes.

Avoid MoEF clearance for import of refurbished goods for testing or R&D: To avoid undue

delays in movement of goods, it may be clarified that second hand/refurbished goods imported

into India for genuine business purposes do not require clearance from the MoEF (Ministry of

Environment and Forest). Such clearance must be required only for goods that qualify as ‘waste’

or ‘scrap’. Further, second hand/refurbished goods when imported by SEZ/STPI units for the

purpose of testing or R&D shall not require prior clearances from MoEF.

Convergence Cell to Improve Clarity in Product Classification: IT products get introduced into

the world market on a daily basis and are imported into India. The nature of the industry is such

that in practically all cases the time span of obsolescence is very short. This requires clarity in

classification and rapid decision making by the Customs authorities. Therefore, it is suggested that

a Convergence Cell be formed to decide on classification of new IT products within 30 days of

representation to reduce instances of confusion and cases of litigation.

Incentives to Encourage Domestic Manufacturing: Among the other reforms outlined to

improve business conditions, MAIT has called for more clarity with regard to levy of basic customs

duty (BCD) and exemption of goods manufactured by SEZ units for the domestic market. It has

sought for speedy disposal of Special Valuation Branch (SVB) cases to avoid unnecessary delays

and uncertainties. MAIT has also suggested amendments for rationalization of tax structures to

avoid double taxation (VAT and Service Tax) and relaxation of CENVAT restrictions to improve

credit access for certain services.

“The government would need to take concrete steps to ensure proper utilization of domestic

manufacturing capacities. The existing capabilities of IT manufacturers have so far remained

underutilized due to adverse tax policies and a poor eco-system,” asserts Mr Shirpurwala.