IT & Electronic
  • The “Electronics and Information Technology Goods Order, 2012” to come into effect from July 03
    04 Aug, 2014

     

    The “Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order, 2012” will come into effect from 3rd July 2013. This order mandates compliance to Indian Safety Standards for 15 notified categories of electronic goods.These electronic goods are Video Games, Laptop/ Notebook/ Tablets, Plasma/LCD/LED TVs, Optical Disc Players, Microwave Ovens, Visual Display Units, Printers/ Plotters, Scanners, Wireless Keyboards, Telephonic Answering Machines, Amplifiers, Electronic Musical Systems, Electronic Clocks, Set Top Box and Automatic Data Processing Machines.

    Considering that some manufacturers and importers have yet not received registration numbers from Bureau of Indian Standards, the Department of Electronics and IT (DeitY) has put in place an interim mechanism vide Gazette notification No. 714 dated 22.3.2013. According to this notification, DeitY shall provide provisional clearance to the manufacturers and importers to sell goods and to obtain registration for a period of three months beyond July 3, 2013. A copy of this extension order is available on website www.deity.gov.in/esdm.

    Department of Electronics & Information Technology” has accordingly put in place a system for granting provisional clearances for units which have not obtained their registration. The application forms and related documents for seeking provisional clearance are available at www.deity.gov.in/esdm. The applications have to be made to Nodal Officer (Standards – Extension), in the Department of Electronics and IT in terms of the aforesaid notification. All manufacturers and importers are requested to make their applications at the earliest to avoid any difficulty in getting their products sold in the market.

    Review of the policy of Foreign Investment in Companies Operating in the Broadcasting Sector

    The Cabinet Committee on Economic Affairs has approved the proposal of the Department of Industrial Policy & Promotion for Review of the policy on Foreign Investment (FI) in companies operating in the Broadcasting Sector. Enhanced access to foreign investment is expected to expand the reach of broadcasting services, thereby improving accessibility of these services, and bring in international best practices. The proposal will make the foreign investment policy for the broadcasting sector consistent with that of the telecom sector, because of the convergence of technologies involved in these two sectors, and thereby bring in greater investments into quality infrastructure for the broadcasting carriage services.

    The CCEA, after review, has liberalised the policy on foreign investment, for companies operating in the broadcasting sector, as below.

    1. Teleports (setting up up-linking HUBs/Teleports): Direct to Home (DTH); Cable Networks (Multi-System-Operators operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability): Currently, foreign investment, up to 49 percent, is permitted in these activities. It has been decided to now increase the foreign investment limit from 49 percent to 74 percent, with the proviso that: (a) Up to 49 percent be permitted under the automatic route and (b) Beyond 49 percent and up to 74 percent be permitted under the Government route
    2. Mobile TV: There is no specific dispensation under FDI policy for mobile TV. It has now been decided to permit Foreign Investment (FI) up to 74 percent, with the proviso that: (a) Up to 49 percent be permitted under the automatic route and (b) Beyond 49 percent and up to 74 percent be permitted under the Government route
    3. Headend-in-the Sky Broadcasting Service: The existing limit of 74 percent foreign investment - automatic route up to 49 percent and Government route beyond 49 percent and up to 74 percent - would continue (i) In respect of Cable Networks (Other Multi-System-Operators not undertaking up-gradation of networks towards digitalization and addressability and Local Cable Operators), the existing limit of 49% foreign investment, under the automatic route, would continue. (ii) Similarly, for up-linking of ‘News & Current Affairs’ TV channels / FM Radio, the existing limit of 26 percent foreign investment, under the Government route, would continue and for up-linking of Non-‘News & Current Affairs’ TV Channels / Down-linking of TV Channels, the existing policy of 100 percent foreign investment, through the Government route, would continue Foreign investment, in companies engaged in all the aforestated services, will be subject to sectoral and security conditionalities and guidelines, as may be specified from time to time, by the concerned Ministries.In the case of companies operating in the telecom sector, the calculation of the direct foreign investment limit includes FDI, investment by Foreign Institutional Investors (FIIs), Nonresident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entities. For companies operating in the broadcasting sector, however, the foreign investment (FI) limits for different activities include different components. It has been decided to rationalise the methodology of calculation of direct investment and the methodology, as applicable to the telecom sector, would also be made applicable across the l&B sector. Accordingly, as in the case of the telecommunications sector, the foreign investment limit in companies engaged in various activities of the I&B sector shall include, in addition to FDI, investment by Foreign Institutional Investors (FIIs), Non Resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entities

    The existing Foreign Investment (FI) limits in companies engaged in the activity of providing broadcasting services are not uniform. TRAI had earlier recommended different Foreign Investment (FI) limits for companies engaged in providing `carriage` and `content` services. It had also stressed the need for a holistic review of the extant Foreign Investment (FI) limits for companies operating in different segments of the broadcasting sector, in order to bring about consistency in the policy, as also to promote a level playing field between competing technologies, in view of the convergence of technologies across the telecommunication and broadcasting sectors. At present, it is possible to provide broadcasting `carriage services" using either telecommunication networks or broadcasting networks. Keeping in view the convergence of technologies in the broadcasting and telecom sectors, uniformity has been proposed in respect of companies providing carriage services (except cable services). For the same reason, uniformity is necessary in the method of calculation of direct foreign investment, in companies operating in the telecom and broadcasting sectors.

    Incentives for Information Technology Sector

    Government extends several incentives for Information Technology Sector in the country. Some of them are

    1. Under Software Technology Parks (STP) scheme, approved units are allowed to import goods required by them for carrying on software export activities as per the Foreign Trade Policy. Such goods may be imported either on outright purchase basis or free of cost or on loan basis from the client without payment of custom duty
    2. Software is also exempted from basic customs duty
    3. 235 IT-ITES specific Special Economic Zones (SEZs) have been notified across the country, which are contributing to IT-ITES exports. Section 10AA of the Income Tax Act provides for a deduction from the total income of hundred percent of profits and gains derived by a unit located in a SEZ from the export of articles or things or from services for the first 5 consecutive assessment years, of fifty percent for further 5 assessment years and thereafter, of fifty percent of the ploughed back export profit for next 5 years.
    4. The Department of Commerce, Ministry of Commerce & Industry through Marketing Development Assistance (MDA) and Market Access Initiatives (MAI) Scheme assists exporters for export promotion activities abroad


    Special Investment Package to Electronics Sector

    Modified Special Incentive Package Scheme to attract investments in Electronics Systems Design and Manufacturing Industries was announced by Government on 12th July, 2012. The Union Cabinet approved the proposal to provide a special incentive package to promote large-scale manufacturing in the Electronic System Design and Manufacturing (ESDM) sector. The scheme is called the Modified Special Incentive Package Scheme (M-SIPS). The main features of M-SIPS are as follows:

    1. The scheme provides subsidy for investments in capital expenditure - 20% for investments in SEZs and 25% in non-SEZs. It also provides for reimbursement of CVD/excise for capital equipment for the non-SEZ units. For high technology and high capital investment units, like fabs, reimbursement of central taxes and duties is also provided.
    2. The incentives are available for investments made in a project within a period of 10 years from the date of approval.
    3. The incentives are available for 29 category of ESDM products including telecom, IT hardware, consumer electronics, medical electronics, automotive electronics, solar photovoltaic, LEDs, LCDs, strategic electronics, avionics, industrial electronics, nano-electronics, semiconductor chips and chip components, other electronic components and EMS. Units across the value chain starting from raw materials including assembly, testing, packaging and accessories of this category of products are included. The scheme also provides incentives for relocation of units from abroad.
    4. The scheme is open for three years from notification.

    Approvals for incentives not exceeding Rs. 10,000 crores will be granted during the XII Plan period. The projects with incentives of Rs 10,000 crores have potential to create employment for nearly 0.5 million persons. The policy is expected to create an indigenous manufacturing eco-system for electronics in the country. It will foster the manufacturing of indigenously designed and manufactured chips creating a more cyber secure ecosystem in the country. It will enable India to tap on the great economic potential that this knowledge sector offers. The increased development and manufacturing in the sector will lead to greater economic growth through more manufacturing and consequently greater employment in the sector.

    IT Sector posts marginal profits in the second quarter

    The Indian  software and services exports including ITeS-BPO exports was estimated at US $ 59 billion in 2010-11, as compared to US $ 50 billion in 2009-10, an increase of 18.0 per cent. The IT services exports also estimated to be US $ 33.5 billion in 2010-11 as compared to US $ 27.3 billion in 2009-10, showing a growth of 22.7 per cent. BPO exports is estimated to grow from US $ 12.4 billion in 2009-10 to US $ 14.2 billion in 2010- 11, a year-on year (Y-o-Y) growth of 14.5 percent. IT services contributed 57 per cent of total
    IT-BPO exports in 2010-11, followed by BPO at 24 per cent and Software products/engineering services at 19 per cent.

    PC HardwareThe Indian domestic IT market witnessed a robust growth in 2010-11. The revenue from the domestic market (IT Services, software products and BPO) has grown from US $ 14.2 billion in 2009-10 to US $ 17.1 billion in the year 2010-11,an growth of about 20.4 per cent. IT services is one of the fastest growing segment in the Indian domestic IT market. It is driven by localized strategies designed by service providers.

    According to the Annual report of the Ministry of IT& Electronics, the performance of Electronics & IT-ITeS industry in 2010-11 was marked by sustained recovery and resurgence in growth momentum. The total production of Electronics & IT-ITeS Industry was estimated to grow at 13.1 per cent in 2010-11 as against 11.6 per cent in 2009-10. This increase in the total value of software and services exports is estimated at 269,630 Crore (US $ 59.0 billion) in 2010-11 as compared to 237,000 Crore (US $ 50 billion) in 2009-10, an increase of 13.8 per cent in rupee terms and 18.0 per cent in dollar terms.

    Consumer electronics is one of the largest segments in the electronics hardware sector in India. The market size of colour television in 2010-11 is expected to be 16.10 million units,
    a growth of 5.50 per cent over the previous year. In value terms, the growth is much higher at 16.40 per cent. This growth is fuelled by the sale of fl at panel LCD TVs which is increasing in exponential terms. The market for LCD TV has increased from 1.5 million units in 2009- 10 to 2.8 million units in 2010-11. Declining prices and low penetration levels is responsible for the growth of this segment. Conventional CRT TV segment on the other hand is stagnant at around 13.30 million units. The DVD player market continues to decline from 6.20 million units in 2009-10 to 5.40 million units in 2010-11.Rapid growth and popularity of the DTH sector is impacting the DVD player market. The Home Theatre segment continues to grow from 0.24 million units in 2009-10 to 0.30 million units in 2010-11, a growth of 25 per cent. Production of microwaves oven is estimated to grow by 21.6per cent to reach 930 Crore in 2010-11 as against a growth of 7.9 per cent in 2009-10. During 2010-11, the total production of consumer electronics is estimated to be 33,400 Crore as against 29,000 Crore in 2009-10, a growth of about 15.2 percent.

    PC sales recorded a growth of 12 per cent in 2010-11 to touch 9.7 million. The Notebook sales are estimated to be 3.5 million in 2010-11 against 2.5 million in 2009-10, a growth of 40 per cent. This shows that Notebooks have caught the fancy of the consumers. Desktop sales are expected to reach 6.2 million in 2010-11 against 5.5 million in 2009-10, a growth of 12.7 per cent. Communication Technology is a key driver for development and growth. India is third largest in the world in terms of gross telephone subscribers, and second largest in Asia. The gross telephone subscribers in the country reached 787.28 Million at the end of December, 2010.Total wireless subscribers are 752.19 million as on December, 2010. The total Wire line subscribers are 35.09 million as on December, 2010. The overall Tele-density in India reached 66.16 per cent in December, 2010 with overall urban and rural tele-densities being 147.88 and 31.18 respectively. The total broadband (256kbps download) subscriber base of India is 10.92million in December, 2010.

    The production fi gure for this segment for the year 2010-11 is estimated to be around Rs14,970 crore as against Rs 13,610 Crore in 2009-10,registering a growth of about 10 per cent. The electronic component segment caters to the consumer electronics, telecom, defense and IT verticals. The growth in these segments is key determinants for the growth of electronic components. The key constituents include semiconductor, capacitors, and resistors, picture tubes, x-ray tubes and cathode ray tubes. The demand in consumer electronics and mobile segment in India has maintained its growth trend in the year 2010-11.

    Policy Measures

    In order to promote the industry, the government has been taken on a continuing basis to rationalize the tariff structure by making suitable changes in fiscal policy as part of annual budgetary exercise.An outward looking and liberal trade policy is one of the main features of India’s economic reforms.Approvals for all foreign direct investment up to 100 per cent in the electronics hardware manufacturing sector are under the automatic route. The salient features of the existing Foreign Trade Policy applicable to electronics hardware industry are brought out below

    • The general Export Promotion Capital Goods(EPCG) Scheme allows import of capital goods at 3 per cent customs duty, subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme, to be fulfi lled in 8 years reckoned from Authorization issuedate. However, a Zero duty EPCG Scheme is available toexporters of electronic products.It allows import of capital goods at zero per cent customs duty, subject to an export obligation equivalent to 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfi lled in 6 years reckoned from Authorization issue-date.
    • The export obligation under EPCG Scheme can also be fulfi lled by the supply of Information Technology Agreement (ITA-1) items to the DTA provided the realization is in free foreign exchange.
    • Supplies of Information Technology Agreement (ITA-1) items and notified zero duty telecom/electronic items in the Domestic Tariff Area (DTA) by Electronics Hardware Technology Park (EHTP)/Export Oriented Unit (EOU) units are counted for the purpose of fulfi llment of positive Net Foreign Exchange Earnings (NFEE).
    • Special Economic Zones (SEZs) are being set up to enable hassle free manufacturing for export purposes. Sales from Domestic Tariff Area (DTA) to SEZs are being treated
      as physical export. This entitles domestic suppliers to Drawback/DEPB benefi ts, CST exemption and Service Tax exemption. 100 per cent Income Tax exemption on export profi ts available to SEZ units for 5 years, 50 per cent for next 5 years and 50 per cent of ploughed back profi ts for 5 years thereafter.