Electronics makers bat for service tax waiver for power sector

Indian Electrical and Electronics Manufacturers’ Association (IEEMA), the apex representative body of manufacturers of electrical equipment, professional electronics and allied equipment, has appealed to the government to extend service tax exemption to power generation, transmission and distribution-related services.

“Being an important infrastructure sector, power generation, transmission & distribution-related services should also be exempted from payment of service tax. With the mission of providing power to all on demand at an affordable cost; exempting all power projects from the levy of service tax would definitely be a step in the right direction and reduce the project cost,” Ieema suggested in its pre-budget memorandum to the union Finance Ministry.

Ieema added that it expected the government to focus on encouraging manufacturing and the creation of a level playing field for the industry to maintain its competitiveness.

“Higher and accelerated depreciation should be allowed for construction equipment at construction sites at 30 per cent from the present level of 15 per cent so that the equipment can be written off in 10 years. This would enable companies to bring in better technology in the manufacturing sector where newer technologies can reduce project cycle time,” Ieema said. Ieema also called for the refund of excise duty paid by domestic manufacturers as a deemed export benefit.

“The generation equipment sector is 26 per cent of the total industry while the transmission and distribution (T&D) equipment sector comprises 74 per cent. The growth rate of the electrical equipment sector decelerated to 6.9 per cent in 2011-12 as compared to 11.3 per cent and 13.7 per cent in 2009-10 and 2010-11 respectively. For the first time in 10 years, the electrical equipment industry has seen a negative growth of 3.9 per cent in the first five months of the current fiscal (2012-13). Therefore, Ieema has made a case for refund of excise duty paid by the domestic manufacturers as a deemed export benefit,” said the Ieema memorandum.

On interest on excise duty for differential price, Ieema has called for an amendment to the sub rule 4 of Rule 7 of Central Excise Rules, 2002, replacing "the month for which the duty is determined’ by ‘the month in which the duty is determined’, to avoid applicability of interest.

Ieema has suggested that entire tax be paid either by the provider or the recipient of the service.