Considering that costs pertaining to finance, energy and logistics/transportation constitute major portion of consumer electronics sector, apex industry body ASSOCHAM has recommended the union government to allow weighted deduction of 150-200 percent of the actual cost on specified components.

“Further, these costs are auditable and duly included in the financial statements of a company,” noted the ASSOCHAM pre-budget recommendations on direct taxes submitted to the Centre.

 “While contributors may be offered tax incentives on the dividend, manufacturers may be provided with tax exemptions,” it said.

“In order to boost the availability of capital funds to India’s USD 100 billion worth electronics industry, it is imperative that a venture capital pool be created and allied tax incentive provided to enable genuine private players to use funds of such pool through a stringent mechanism,” said ASSOCHAM secretary general, D.S. Rawat.

It added that government did not receive expected response under this scheme – one reason could be that overall benefit under this scheme will be reduced by 33 percent as the assesses cannot claim depreciation on assets funded by the government subsidy.

Further, the chamber highlighted that there is currently dispute in taxability of royalty in case of software (being copyrighted article) that forms part of hardware.

Thus, in order to avoid litigation and in line with global principles for taxation of software and judicial pronouncements of  Supreme Court in case of customs and service tax, ASSOCHAM has recommended that it should be clarified that distribution of copyrighted articles being software forming integral part of hardware would not fall within the ambit of royalty.  - TV Veopar Journal Bureau