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.
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.