MAIT welcomes Government initiatives to boost domestic consumption

IT Hardware industry to pass on 4% across-the-board excise duty cut to consumers; simultaneous rationalization of duty on software urged
Soft loans for home & SMES, 100% depreciation for enterprises recommended to boost IT demand

Bangalore, December 08, 2008: MAIT, the apex body representing India’s IT hardware, training and R&D services sectors, welcomed the announcements by the Union Government to give a boost to domestic consumption and provide stimulus to the national economic growth through enhanced allocation of planned expenditure, cut in fuel prices, drop in the repo rate and four percent across-the-board reduction of excise duty. Further, the industry body expressed satisfaction that the Government had taken timely measures towards sustaining growth of exports, infrastructure, small and medium enterprises, textiles and housing sectors which had been facing significant slowdown.

Expressing satisfaction on the recent announcements by the government, Mr Vinnie Mehta, Executive Director, MAIT, said, “We welcome the several proactive measures announced by the government to sustain the growth of the domestic economy. Four percent, across-the-board reduction in CENVAT rate (excise duty/CVD) will help bring down the prices of IT products. With this, desktops and notebooks will attract eight percent excise duty while all other hardware equipment would attract ten percent.”

Mr Mehta added, “Along with drop in excise duty for IT hardware, it is essential that the government rationalizes the duty on software which currently attracts 12 percent service tax, failing which there would be CENVAT overflow in case of local computer manufacturing.”

With the impact of global economic crises on the domestic economy, the consumption of IT products has also been adversely impacted in the last few months. Further, in the last six months strengthening of the US dollar by over twenty-five percent against the rupee has significantly eroded the margins of the IT hardware industry, several of the companies had to resort to price increases. Elaborating on the measures that the body has recommended to the government to boost consumption of IT products in the country, Mr Mehta added, “Making available finance at attractive rates for the home market and the SMEs for IT purchase will spur the market. All nationalized and PSU banks, therefore, should earmark sufficient funds for the same. The process of loan disbursement for such cases needs to be simplified as well. Further, the governments at the centre and the state should provide soft-loans to all their employees for procuring IT products, currently such loans are available to officials beyond a certain ranking. Several empirical studies have shown that there is a large aspiration among the lower class employees for buying computers, especially for their children. Lastly, to encourage IT consumption in the enterprises, the government should extend a one-time hundred percent depreciation on all IT products procured by them.”

About MAIT:
Set up in 1982 for purposes of scientific, educational and IT industry promotion, MAIT has emerged as an effective, influential and dynamic organisation. Representing hardware, training R&D and associated services sectors of the Indian IT Industry, MAIT’s charter is to develop a global competitive Indian IT Industry, promote the usage of IT in India, strengthen the role of IT in national economic development and promote business through international alliances.

For more information contact:

Ashutosh Bhattacharya
IPAN
Phone: 011 4249 2100/ 167
E-mail: ashutosh.bhattacharya {at} ipan(.)com