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September 10, 1998


Zero import duty suggested for local PC makers

Email this story to a friend. The Information Technology Taskforce's sub-committee on hardware submitted its report recently.

Among the concessions asked for by the sub-committee are controversial ones aimed at protecting local computer suppliers.

The sub-committee has recommended that import duty on components be
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reduced to zero for actual users, which are local computer manufacturers.

This will give them an added advantage over foreign suppliers such as IBM, which import their personal computers in complete form and pass on the higher import duty.

It is understood that the taskforce itself is divided on whether such concessions should be given to the domestic industry alone.

The sub-committee has also asked the government to offer other tax concessions, including a six-year tax holiday, for promoting manufacture and exports of computer equipment.

Suggesting major changes in export, banking and labour policies vis-à-vis computer hardware, the sub-committee in its 84-point recommendation, sought full credit against modified value-added tax, exemption from special additional duty for import of components and duty-free import facilities for actual users.

It has said that IT units in a co-operatively managed zone area, known as soft-bonded IT, or S-BIT, should be treated with special sops, including imports without payment of duty on self-declaration basis.

The industrial entrepreneur's memorandum in the ministry of industry will grant permission within seven days to start new S-BIT units and conversion of existing units into S-bits.

The report has asked financial institutions like ICICI to set up joint ventures with local or foreign partners to set up venture capital funds dedicated to the IT industry, in which even banks could have equity participation.

Working capital for IT products would nearly triple to Rs 20 billion in the next two years from Rs 7.5 billion and therefore IT products and related industry be treated as priority sector for bank financing, the report said.

IT products and related services should be exempted from the Venture Capital Investment Act, it added.

For listing of IT companies at the National Stock Exchange, the report suggested that the threshold limit be reduced to Rs 10 million. The taskforce has also recommended amendment in the Companies Act for increasing the total paid-up capital by 10 per cent for allocating it to employees, promoters and directors as stock options without prior approval at annual general meeting.

IT companies should be allowed to issue shares to employees under employers' stock-option plan at 30 per cent below the average market price of past six months but with the approval of the annual general meeting.

Domestic hardware companies or its subsidiaries abroad should be allowed to issue 'sweat equity' to promoter-directors or any employee providing know-how to the company.

The taskforce report on hardware follows another IT report and software development which was submitted to the prime minister in July this year.

- Compiled from the Indian media

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