India Considers Tax Breaks For Foreign IT Manufacturers

by Lorys Charalambous, Tax-News.com, Cyprus

13 June 2003

The Indian government is preparing a package of tax breaks aimed at developing an export-orientated computer hardware and technology sector, which will help transform the country into a key hi-tech manufacturing location.

Among the more significant proposals contained in the government sponsored National Electronics/IT Hardware Manufacturing Policy is a ten year tax holiday for exporters of IT hardware and other electronic goods.

Other measures contained in the proposals include the elimination of customs duty on all raw materials and components used in the manufacture of IT equipment, as well as the freezing of the forthcoming VAT (Value Added Tax) at 4% on electronic and IT products. Special additional duty on imports will also be scrapped.

The policy document proposes the use of cash subsidies and further tax breaks to lure large multinational firms such as chip maker Intel. In addition, it recommends increasing annual depreciation levels on computer equipment to 100% from the present level of 60%.

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