PRICES of electronic goods like LCD TVs, home-theatre systems and high end mobile phones may fall by 8% to 10%, according to early indications of the 2008 Budget exercise. The finance ministry is inclined to reducing duties on consumer electronics to 12% as compared to 16% now. At the same time, the ministry has indicated that it was not in favour of reducing excise on raw materials like plastic and intermediaries like components.
The move to reduce excise on electronic goods is to bring them at par with computers and laptops which are taxed at 12%. This move would rationalise the excise structure and bring excise on all similar products at the same level.
Presently there is a three-tier tax structure on electronic hardware items –– raw materials, components and finished products. All of three stages attract an exise duty of 16%.
“Bringing down tax on raw materials would not be possible as raw materials are used by several industries and consists of several different items and it would require a rejig of the whole duty structure. But we are certainly looking at providing some relief on the component and finished product basket,” a government official said. The duty cut is in line with the government’s plans to encourage the hardware manufacturing. Most of the country’s hardware needs are now met through imports and the government is planning to change this trend by encouraging investment in IT hardware manufacturing.
“There is almost complete dependence on imported hardware and even software for the entertainment and electronics goods sector is imported. The government’s move is aimed at reversing the trend,” an official in the department of information technology said.
The exise cut for electronics items may come as a boost to LCD TV and plasma TV makers. According to an estimate by the department of information technology, the popular size for TVs in 2005-06 was 26” which increased to 32” in 2006-07.
In the current fiscal, officials feel, 42” TVs may take the lead.