DESPITE THE constraints of an inverted customs duty structure and high levels of excise duties on the main growth drivers of white goods and consumer electronics industry, the consumer durable sector is set to surpass the overall growth of 11.5 per cent achieved in 2006-7 to close the current financial year (2007-08) 0.5 per cent points higher at 12 per cent, according to the latest FICCI survey on growth projections for the Consumer Durable Goods sector for 2007-08.

 

The FICCI (Federation of Indian Chambers of Commerce and Industry)survey highlights the main issues and problems affecting the consumer durable sectors in general and some sectoral issues. There is a need for removing some anomalies that are hurting the growth of the industry. Consumer electronics manufacturers are of the opinion that in the era of digital convergence, differential taxation policies for IT and consumer electronics products create distortions and anomalous situations.

 

The survey highlights that the market for non-IT consumer durable goods estimated at Rs 35,000 crore in 2006-07, with 11.5 per cent growth against 8.5 per cent growth last year, is expected to achieve about 12 per cent overall growth in the year 2007-08.

 

The survey also confirms that many of the high-end products like high-end TVs like LCD TVs, MP3s, DVDs, Split Air Conditioners, High-end washing machines, fully automatic washing machines and microwave ovens are being manufactured during the recent years and do not find place in the list of items covered by the CSO (Central Statistical Organization) for calculating official data have excellent growth rates. 

 

At present, the customs duty on colour television, colour picture tubes, refrigerator and air conditioner on import from Thailand is 10 per cent. This has come down to 6.25 per cent from September 2006 and zero per cent in year 2007. On the contrary, many inputs for production of these items attract the peak rate customs duty of 10 per cent. This anomalous situation would discourage entrepreneurs to manufacture and invest in India.

 

The industry is in favour of granting 40 per cent abatement on MRP-based excise duty on CTVs and air conditioners from 35 and 30 per cent respectively. There is the need for reducing excise duties on colour picture tube and some equipment used by the black and white TV industry.

 

According to the survey, the government has to treat all electronic hardware as one and there is an urgent need for evolving a uniform tariff and tax structure for all electronic hardware. Although the government has reduced peak customs duty from 12. 5 per cent to 10 per cent, the net effect on imported products will remain the same due to the increase in education cess.

The industry is suffering due to inverted duty structure and high taxation. The business foresees threat to domestic production of some sectors because of inclusion of some items in the Early Harvest Scheme under FTA (Free Trade Agreement)with Thailand.

 

The Fringe Benefit Tax (FBT) is an area of concern. The consumer durables industry relies heavily on promotional and advertising activities to drive sales, especially during festive seasons. But since 2005, the FBT has to be paid on freebies given to consumers during promotions. It is also charged on payment to celebrities used as brand ambassadors by corporates.

 

Income tax exemption for five years should be allowed in case of electronics hardware industry. Interest rate at five per cent for five years should be allowed.