Govt Fiat To Cost Hardware Firms Rs 200 Crore

IT hardware companies, including multinationals, may have to shell out as much as Rs 200 crore to comply with a recent government notification.

The government has decided to include the value of software, such as operating-systems and packages, which come pre-loaded with computers, in assessing the value of a computer.

The government has directed the companies to pay 16 per cent excise duty on the packages, with retrospective effect from July 2000.

But the packages which are bought from the market separately will not attract any duty, since the government had abolished excise duty on packaged software in 2000.

The government has also issued showcause notices to the hardware companies, including Hewlett Packard, Compaq and HCL Infosystems, among others, asking why the companies were not paying excise duty. The Central Board of Excise and Customs (CBEC) issued a circular to this effect on July 12, 2002.

This means, if one is buying a personal computer which comes pre-loaded with software packages worth Rs 20,000, the consumer will have to pay Rs 3,200 as excise duty, making computer costly by that much. But if the consumer is buying the software from open market, he would not need to pay the duty.

Companies started pre-loading software for ease of use for the consumers, who would not need to face the trouble to load the computer with the software himself or get the help of an expert.