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Tax concession to boost PC sales

Aug 5, 2000

There is good news for the hardware industry. Riding high on the Internet boom and the revival in the economy is likely to boost the personal computer (PC) sales in the country. PC sales during the FY00 registered a remarkable growth of 37% to 1.4 m compared to 1 m in the previous year and are expected to touch 2 m in FY01. Interestingly much of this growth has come from household buying which grew by 57% while the business segment grew 32%. However the disappointing fact for branded manufactures is that the share of unbranded, assembled PC manufacturers has increased from 53% in FY99 to 58% in FY00. In unit terms the assembled market has more than doubled within the last two years to touch a sale of 800,000 units per annum compared to 370,000 units in FY98.

Increasing share of unbranded PC is likely to negatively affect the recognised branded manufactures like HCL Infosystems and Wipro. In an effort to boost the sales of branded PC, the Union government is planning to waive off sales tax on all computer hardware components. The government is planning to reduce the excise duty on IT products from the present 16% to 8% in the current year. During the year the custom duty waiver was already announced by the Union Budget on the key parts of the PC.

Apart from direct benefits to hardware companies, the reduction in sales tax and excise duty on the major items of hardware would also lead to cost savings for most of the software companies who invest huge amounts every year in computers and other hardware. It will also improve the PC penetration in the country, thereby, facilitating the growth of IT sector as a whole.

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