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Hardware firms may be allowed duty-free imports

It is learnt that the report, which was prepared by a sub-committee, was accepted by the task force in its entirety.

T O D A Y

• Can't grow food on Net! • HCL net profit up 520% • Hardware sops likely • MTNL results

The report will be handed over to the prime minister next week, official sources say. The major recommendations pertain to the 'Soft Bonded IT Units Scheme' and simplification of procedures and measures to boost research and development.

The highlight of the report is the S-BIT scheme. Companies engaged in IT product manufacture, systems integration, services, etc, would be eligible for the scheme. Under the scheme, a company can import goods - both raw material and capital - free of duty.

If the company wishes to sell in the 'domestic tariff area', the following levels of duty would be imposed: 10 per cent of prescribed import duty for components, 40 per cent of duty for intermediates and 65 per cent of duty for end equipment.

There will be no export obligation and companies can sell 100 per cent of their goods in the DTA. Instead, there will be an incentive for exports through discounts on duty payable for bringing the goods into the DTA.

For instance, for companies that export 25 per cent of their output, the levels of duty payable for bringing goods into DTA would be further reduced by 25 per cent.

The next slab would be for companies that export 50 per cent of their manufacture. Such companies will be eligible for a 50 per cent discount on duty payable.

The idea, one official pointed out, is to make local manufacture attractive. The task force has, however, decided to retain 2003 for phasing out of all duties on IT goods.

S-BIT schemes would also simplify import-export procedures through a self-declaration process. There would be no verification at this stage but within six to eighteen months of the transaction, Government appointed franchises would inspect and audit the units.

Another important recommendation pertains to venture capital. Banks would be allowed to invest in such funds. It has been suggested that institutions such as ICICI and TDICICI set up joint ventures with Indian or foreign companies for setting up at least two different venture capital funds of a corpus not less than Rs 1000 million each exclusively for the hardware sector.

All IT products and related services would be considered for exemption under Section 10(23)F of the Income Tax Act for venture capital investment.

The section is also proposed to be modified to replace the term computer software with IT products, IT software and IT services. The National Stock Exchange threshold level would be reduced to Rs 10 million for the IT industry.

On sops for R&D, it has been recommended that S-BIT shall apply for R&D design units. A prototyping centre is also proposed to be set up.

- Compiled from the Indian media

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