MAIT outlines reforms to improve business environment in India

The association calls for faster clearances and streamlining of procedures to improve the conditions for doing business in India

Manufacturers' Association for Information Technology (MAIT), the apex body representing IT manufacturers, has outlined a set of reforms needed to improve the business environment for IT manufacturing and to push India's overall position in the world market in terms of the 'Ease of Doing Business' index. According to the World Bank's Doing Business 2016 data released recently, India currently stands at #130, which is way below China at #90. MAIT has highlighted certain complexities in existing procedures that are creating bottlenecks for IT manufacturers in conducting their business effectively.

Anwar Shirpurwala, Executive Director, MAIT says, "At present there are multiple regulatory and operational issues plaguing the Indian manufacturing sector, and the IT hardware industry in particular. If the government is serious about campaigns like 'Make in India' these issues will have to be resolved quickly. The business environment in India has to be improved and brought at par with other countries."

As part of MAIT's Pre-budget Recommendations, the following key reforms have been suggested by the association to ease the business environment for the IT manufacturing sector:

Reduce time taken for customs clearances: This could be done by extending the green channel facility for free movement of goods pertaining to R&D shipments; encouraging hand carriage of goods with provision for monthly customs duty payment facility; relaxation of mandatory first check processes at the ports pertaining to free of charge / exempted shipments; and avoiding Special Valuation Branch (SVB) inspections for goods that are already cleared under duty exemption schemes.

Avoid MoEF clearance for import of refurbished goods for testing or R&D: To avoid undue delays in movement of goods, it may be clarified that second hand/refurbished goods imported into India for genuine business purposes do not require clearance from the MoEF (Ministry of Environment and Forest). Such clearance must be required only for goods that qualify as 'waste' or 'scrap'. Further, second hand/refurbished goods when imported by SEZ/STPI units for the purpose of testing or R&D shall not require prior clearances from MoEF.

Convergence Cell to Improve Clarity in Product Classification: IT products get introduced into the world market on a daily basis and are imported into India. The nature of the industry is such that in practically all cases the time span of obsolescence is very short. This requires clarity in classification and rapid decision making by the Customs authorities. Therefore, it is suggested that a Convergence Cell be formed to decide on classification of new IT products within 30 days of representation to reduce instances of confusion and cases of litigation.

Incentives to Encourage Domestic Manufacturing: Among the other reforms outlined to improve business conditions, MAIT has called for more clarity with regard to levy of basic customs duty (BCD) and exemption of goods manufactured by SEZ units for the domestic market. It has sought for speedy disposal of Special Valuation Branch (SVB) cases to avoid unnecessary delays and uncertainties. MAIT has also suggested amendments for rationalization of tax structures to avoid double taxation (VAT and Service Tax) and relaxation of CENVAT restrictions to improve credit access for certain services.

"While the 'Digital India' mission can give a big boost to domestic consumption of IT goods, to achieve the ambitious target of Net Zero Imports the government would need to take concrete steps to ensure proper utilization of domestic manufacturing capacities. The existing capabilities of IT manufacturers have so far remained underutilized due to adverse tax policies and a poor eco-system." asserts  Shirpurwala.

MAIT believes the above reforms will immensely benefit IT manufacturers in India and will encourage more companies to invest in manufacturing. They will not only help improve India's Doing Business ranking in the global market but will also go a long way in realizing the 'Make in India' vision of the government.