Expectations of Electronics Sector from Union Budget 2023-24: ELCINA

Expectations from Union Budget 2023-24:

Electronics Industries Association of India (ELCINA) recommends that the shift in focus of the government towards export led growth of electronics sector needs to be pursued further and with greater zeal. This will achieve economies of scale and competitiveness in the globalized zero duty market for this sector. Target for Electronics manufacturing in India has been set at US$ 300 Bn by 2026. To achieve this ambitious target ELCINA has made the following recommendations. Please find the Key Pointers of these recommendations for Union Budget 2023-24 below followed by the detailed recommendations:

BUDGET WISHLIST – KEY POINTERS for Electronics Industry –Components, EMS and High Value Added Manufacturing:

   Incentivizing Investments

1. Government should allocate US$ 10 Bn over a period of 8 years to boost manufacturing of electronic components and key modules other than Semiconductors. Semiconductors are covered under the special Rs 76,000 Cr Scheme already announced in 2022.
2. Four-year extension to the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) with an increased outlay of Rs 16,000 crore (US$ 2BN) in the Union Budget for 2023-24. This will facilitate investments of US$ 8 Bn and targeted output of S$ 24 Bn for all components other than Semiconductors.
3. Special PLI Scheme for Components – Allocate US$ 1 Billion per annum for next 8 Years for special Production Incentive Scheme for Components
4. Support to EMS companies through a PLI Scheme and Capital Incentive for MSME EMS companies investing upto Rs 50 Crores.
5. Setup Venture Capital Fund with Income Tax benefits for investing in Electronic Component Manufacturing units which need low cost equity/capital due to high capital output ratio and long gestation period. High cost finance is one of the main hurdles for high value added component manufacturing.

Enhancing Competitiveness

• Subsidizing Cost of Testing & Certification  under Compulsory Registration Order (CRO)
• Provide Interest Subvention as well as support for Market Development Fund under MeitY.

Promoting R&D

• Reinstatement of Sec-35(2AB) IT relief to promote R&D
• CSR Obligations of ESDM companies should for allowed for utilization for supporting R&D and deep tech development by R&D institutes and Start Ups.

Export Promotion

• Inclusion of selected electronic items in RBI circular no. 62/04.02.001/2015-16 on the list of goods included in the circular — Interest Equalization benefits on Pre and Post Shipment Rupee Export Credit to eligible exporters.
• Mitigating disabilities for electronics exports – RoDTEP is providing barely 1% nemefit to exporters. We recommend to provide 5% benefit to exports of components and 2% to EMS companies to successfully access the huge opportunity in export markets.

Specific Tax Recommendations

• Import Duty on Washing Machines (Over 10 kgs) and Cloth Dryers is 7.5% and 10% respectively. Recommended to raise to 15% on both these products as these are manufactured locally.
• Reduce GST on LED TV’s between 32 and 55 inches to 18%
• Make IGCR Rules simpler and easier for use by importers of inputs for component manufacturers as per Cus Notif 25/99.
• Reduce documentation for approval of per diem allowances for employees on official travel. Upto INR 2000 per day for domestic travel and INR 6000 per day for international travel may be allowed without documentation. Documentation may be required for expenses only above these limits.