Financial Daily from THE HINDU group of publications
Friday, Jan 09, 2004
Industry & Economy - Budget
PC prices to drop as Govt cuts excise duty
New Delhi , Jan. 8
PRICES of personal computers (PCs) will drop by 6-9 per cent with the Government today halving the excise duty on computers to eight per cent, a move that would spur sales of branded PCs.
Companies such as HCL Infosystems, Hewlett-Packard and Wipro will benefit from the duty cut, along with buyers, analysts said. HCL Infosystems' stock closed 9.06 per cent higher at Rs 424.35 on the National Stock Exchange.
The excise duty cut will reduce the price difference between branded computers and locally assembled machines, which are cheaper because of evasion of levies and use of pirated software. In the first half of this fiscal, assembled PCs accounted for 57 per cent of India's 1.2 million PC sales.
The removal of four per cent special additional duty (SAD), reduction of customs duty to 10 per cent from 15 per cent and duty-free import of laptops brought as part of luggage will also benefit the country's hardware sector, they said.
"There is no reason why anybody should now buy an unbranded computer," said Mr Ajai Chowdhry, Chairman and CEO of HCL Infosystems. "The price differences will now go."
According to Mr Vinnie Mehta, Executive Director of Manufacturers' Association for Information Technology (MAIT), a computer priced at Rs 30,000 will now be cheaper by Rs 1,800 to Rs 2,100.
The abolition of SAD and the customs duty reduction in accordance with the IT Agreement of WTO will bring down the price of an imported computer by 14 per cent, Mr Mehta said.
"The Government has met a long standing demand of the IT manufacturing industry.
"The cut in excise duty and SAD will make the organised sector price competitive vis-à-vis the grey market, lead to higher PC penetration in the country and help make the domestic PC market far more attractive," MAIT said in a statement.
The excise duty cut on computers, coming after five years, will enthuse people to go for new machines or high performance PCs, said Mr Rajendra Kumar, Vice-President of HCL Infosystems.
The decision to allow manufacturers to remove semi-finished goods and finished goods for further processing or testing without paying excise duty will also help the hardware sector, Mr Mehta said.
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