25/02/2015 7:17 PM IST | Updated 15/07/2016 8:25 AM IST

Need Friendlier Tax Regime, Preferential Market Access

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electronic technology

It is budget time again; a time for great optimism for India Inc. As the voice of the ESDM industry at large, we at IESA would like to take this opportunity to submit our expectations - the collective expectations of the ESDM ecosystem - from this budget to our Honourable Finance Minister. There were progressive policy developments which had created positive optimism and some impact but mega actions are required to bring large scale investments and attract ESDM majors to our country.

Government policies have an invaluable role to play in creating a level playing field. Today, it is also extremely important to ensure that the critical long-term needs of the country are met through technology investments with active involvement of the private industry.

Set up Electronics Commission: There is an immediate need to set up an Electronics Commission which includes industry representatives. With an initial budget of 1000 crores, this would act as a nodal body to construct a conducive policy environment. Set up the office of a Chief Technology Officer / Chief Scientific Officer within Electronics commission.

Approve and implement policy: Hasten the implementation / approval of the Fabless Policy, Electronic Development Fund; extension of M-SIP's, other investment proposals and incentives to fast-track manufacturing expansions and funds for start-up scaling up.

Preferential market access (PMA) to companies manufacturing products in India: The existing PMA policy should be implemented immediately, and the government should be mandated to procure indigenous electronic products. Government purchases of Indian products that use indigenously designed ICs should be made mandatory.

A favourable tax regime will bring Indian players on par with global manufacturers. IESA Disability study report indicates two key parameters impacting competitiveness of locally manufacturing goods viz: Taxation and Finance cost. In most advanced countries, investments by large corporates are the main catalysts for success of technology start-ups and component ecosystem. Favourable grants will maximize value addition in the country and create a culture of innovation and IP creation. Hence, we propose Deemed Export status for ITA1 products/components manufactured and sold in India and removal of restrictions on import of used equipment for R & D.

Correction of inverted duty structure: We wish to see this done for various electronic products, along with simplification of service tax assessment and refund for export-oriented companies. We would like the government to enable free-flow of imported components that are used for prototyping and assure MNCs of a stable tax administration including transparent and unambiguous transfer pricing policy.

In order to create a demand stimulus and localisation of products, it will be good to see additional import duty cushion on non-ITA 1 products and fast-track key pan-India initiatives such as cyber security, Digital Radio's, NOFN and broadband through cable to, etc. Special benefits for high volume products such as Mobile Phones, Computers, STB's can help create local component base.

We are very hopeful that the government is listening and that the coming budget will galvanize the whole ESDM industry. Real economic growth can be fuelled only through innovation-led design and design-led manufacturing. Let us all look forward to continuing 'achhe-din' for the ESDM industry.