Published On: Mon, Feb 15th, 2016

Taxation on imported raw materials disturbing manufacturers

Start-ups being acquainted with the idea of generating varied and distinguished products are finding it difficult to compete in the domestic market owing to the tax imposed on imported raw materials  which are unlikely to be available in India.

In a brief conversation with Anubhav Goel, Managing Director, High street lighting Pvt Ltd, KNN gets insightsinto the issue.

Plastic Raw Material

Taxation on imported raw materials disturbing manufacturers

High street lighting is a start-up company established with the vision of taking forward the Make in India initiative to indigenously design, manufacture and market a wide range of green energy products like solar home lighting systems and led street lights.

“Towards the start of product conceptualization we sourced some reference products from the global market and also simultaneously started indigenous product development,” said Goel.

He highlighted that the start-up is suffering as a result of unfavourable tax structure and policies designed for the import of raw materials. “As we made progress on the development of design by sourcing required raw material from the Indian and overseas market for our product line of solar home lighting systems, we face a problem of inverted duty structure,”Goelsaid. The final finished product solar home lighting system when imported as a finished product into India is exempted from basic customs duty and also balance applicable duties like CVD and surcharge.

However, if the same solar home lighting system is manufactured in India using imported raw material like semiconductors and other indigenously sourced raw material like plastic moulded cabinets, printed circuit boards, connectors, then all the raw material has to undergo through-multiple taxation like excise duty, sales tax if sourced locally and for imported raw material full range of basic / counter vialling and surcharge customs duties are applicable.

The entrepreneur was quite distressed at this biased taxation against the imported raw materials. “One of the core components of this solar home lighting systems is lithium ion battery pack which also attracts a overall duty cost of approximately 30 per cent on the basic price which is a very high cost burden and also the fact that there is no Indian manufacturer for this battery technology and the only option is to import from overseas manufacturers,” said Goel expressing his infuriation.

Enormous taxes and duties imposed on the raw material for solar lightings have resulted in indigenously manufactured products becoming commercially unviable. This leaves the manufacturers importing raw materials in a non-competitive spot to manufacture in India.

“We request the government to provide a level playing field by removing this inverted duty structure where in the taxation structure is higher for raw material and lower or not applicable for finished products,” Goelsaid, as he appealed to the authorities to look into the tax structure.

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