The Manufacturers' Association of Information Technology on Friday demanded that the Union government expedite implementation of the proposed policy on national electronics/IT hardware manufacturing.

The association expects the policy would provide domestic hardware companies a conducive environment to grow and improve the foreign direct investment inflows.

A ten-member team of the association including representatives from Wipro, IBM and Acer, on Friday met Andhra Pradesh Chief Minister N Chandrababu Naidu.

The IT secretary has prepared a draft paper on the policy two weeks back and submitted it for the consideration of various departments.

After the clearance from the concerned ministries, it needs the approval of the Parliament before getting implemented.

"We are eagerly awaiting the implementation of the policy because some of the proposals in the draft policy such as reduction of customs duty to zero per cent on all the raw materials and inputs required in the manufacture of electronic components and levying of composite VAT at 17 per cent on electronic and IT products would propel the growth of the industry, MAIT president K R Naik told reporters after meeting Naidu.

The draft policy, a copy of which was made available to Business Standard, also recommends rationalisation of sales tax and proposed VAT on all electronic and IT products and components to four per cent, customs duty on finished equipment not to exceed 20 per cent, income from export of electronics/IT hardware to be exempted from Income Tax for ten years, setting up of a Megafab (chip manufacturing facility) in the country, promoters be given cash subsidy and other tax incentives and phasing out of SAD on imports in line with central sales tax.

The policy also proposes setting up of hardware manufacturing cluster parks  which would be bonded areas with each location having its own focus.

It also proposes income tax benefits under section 80 IA for 10 years out of the 15 years and 50 per cent tax for the next five years to the promoters of the parks.

To encourage relocation of manufacturing plants to India, the policy proposes offering special incentive on one-time and on a short window basis to companies which set up large operations, procure substantial inputs from local sources and develop vendor base for catering to export markets.