Pre-bud­get sug­ges­tions of IEEMA to the Fi­nance Min­istry.

IEEMA pre­sented its pre-bud­get mem­o­ran­dum to the Min­istry of Fi­nance for con­sid­er­a­tion and made the fol­low­ing sug­ges­tions on nu­mer­ous is­sues per­tain­ing to the elec­tri­cal equip­ment in­dus­try.

Power Watch India - - CONTENTS -

Re­move im­port du­ties on CRGO elec­tri­cal steel

Cold Rolled Grain Ori­ented (CRGO) elec­tri­cal steel is a crit­i­cal raw ma­te­rial for man­u­fac­tur­ing of trans­form­ers. CRGO is fully im­ported as it is not man­u­fac­tured in In­dia. Cur­rently, CRGO con­sump­tion in In­dia is about 2.5 lakh MT/an­num. Con­sump­tion is es­ti­mated as 11.5 lakh MT for the en­tire 12th Plan pe­riod (2012-2017) and 13.5 lakh MT for the en­tire 13th Plan pe­riod (2017- 2022).

IEEMA sug­gested that the coun­try needs to plan do­mes­tic CRGO avail­abil­ity strate­gi­cally. The present ba­sic cus­toms duty on CRGO steel is 5%. Nil BCD on im­ports of CRGO steel should be al­lowed (HS Code 72251100 and 72261100) till in­dige­nous pro­duc­tion is made available.

Duty-free im­ports of elec­tric­ity me­ter parts

Presently, elec­tric­ity me­ter man­u­fac­tur­ers are pay­ing ba­sic im­port duty (7.5% to 10%) on ma­jor parts i.e. switch, re­lay, bat­tery, in­duc­tors, mag­netic/ Fer­rite core, ca­ble as­sem­blies, adapters, buzzers, plas­tic and metal seals. This im­port duty makes In­dian elec­tric­ity me­ters costlier and in-com­pet­i­tive in com­par­i­son to those that are man­u­fac­tured in other coun­tries, es­pe­cially China. For items like back­light, the gen­eral chap­ter head­ing (8541) has zero ba­sic cus­toms duty. But parts that are used in me­ter man­u­fac­tur­ing, the same are be­ing con­sid­ered un­der HS Code 90289010 and are sub­ject to ba­sic im­port duty of 7.5%.

Since the govern­ment has em­barked on the Deen Dayal Upad­hyaya Gram Jy­oti Yo­jana, it is im­per­a­tive that sec­tors such as elec­tronic me­ters are given an im­pe­tus so as to en­sure that costs be­come eco­nom­i­cal for over­all suc­cess of the ini­tia­tive. We pro­pose zero ba­sic cus­tom duty for all elec­tronic com­po­nents (against chap­ter head­ing 90289010) so as to fa­cil­i­tate an over­all re­duc­tion in price and also at the same time, in­crease ex­port com­pet­i­tive­ness.

Elec­tric­ity to be in­cluded within GST regime

As per Model GST Law, elec­tric­ity has been kept out­side the am­bit of GST and the State would con­tinue to levy elec­tric­ity duty on sale of elec­tric­ity. In case of works con­tracts ex­e­cuted in the na­ture of power trans­mis­sion and dis­tri­bu­tion, EPC con­trac­tors, power plant, var­i­ous pur­chases would charge GST to the elec­tric­ity and power trans­mis­sion and dis­tri­bu­tion com­pa­nies. Credit of GST paid by the elec­tric­ity and power trans­mis­sion and dis­tri­bu­tion com­pa­nies to EPC con­trac­tors would not be available and hence such credit would be an ad­di­tional cost to the com­pany. IEEMA sug­gested that elec­tric­ity be sub­sumed within the scope of pro­posed GST.

MAT Tax rate

At present cor­po­rate tax rate for In­dian com­pa­nies is 34.61%. MAT rate for In­dian com­pa­nies is 21.34%. The ra­tio of MAT which is con­sid­ered as Min­i­mum Al­ter­nate Tax is too high as com­pared to the nor­mal tax rate. There is a gen­uine need to lower the rate so to jus­tify the same to be a “min­i­mum al­ter­nate tax”. IEEMA sug­gested that the MAT rate should be re­stricted to 50% of the nor­mal tax rate.

Am­bi­gu­ity re­gard­ing in­put tax credit in re­spect of works con­tract

Sec­tion 16(9)(c) of Model GST Law pre­scribes goods and /or ser­vices ac­quired by the prin­ci­pal in ex­e­cu­tion of works con­tract when such con­tract re­sults in con­struc­tion of im­mov­able prop­erty, other than plant and ma­chin­ery”. Def­i­ni­tion of “Prin­ci­pal” means a per­son on whose be­half an agent car­ried on the busi­ness of sup­ply or re­ceipt of good and / or ser­vices. Clar­ity is re­quired if Prin­ci­pal means the ul­ti­mate con­trac­tor or ev­ery sub-con­trac­tor in each part of the value chain where there is a sub-con­tract­ing. Sim­i­larly, the mean­ing of plant and ma­chin­ery is not de­fined in the GST law there­fore it will lead to var­i­ous in­ter­pre­ta­tions. It seems the in­ten­tion of the govt is to deny the GST credit only in re­spect of con­struc­tion which re­sults in im­mov­able struc­tures like build­ings. There­fore IEEMA sug­gested that the rel­e­vant sec­tions should be mod­i­fied to that ex­tent so as to ex­actly bring out such an in­ten­tion in the proper man­ner.

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