Navigating the Evolving Landscape of IT Hardware Import Regulations in India: Analyzing the DGFT Circulars of October 2023 and January 2024

Circular No. Policy Circular No. 09/2023-24 - Dated: 12-1-2024 - Clarification regarding Import Policy Provisions for Laptops, Tablets, All-in-one Personal Computers and Ultra Small Form Factor Computers, Servers under HSN 8471

Introduction

In recent months, the Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce & Industry, Government of India, has issued significant clarifications regarding the import policy of IT hardware in India. These clarifications, detailed in the DGFT's Policy Circular No. 06/2023-24 dated 19th October 2023, and Policy Circular No. 09/2023-24 dated 12th January 2024, have profound implications for the trade and industry sectors, particularly those dealing with specific categories of IT hardware.

Background

The DGFT, in August 2023, initiated restrictions on the import of certain IT hardware under Notifications No. 23/2023 and 26/2023. These restrictions were further clarified and expanded upon in October 2023 and January 2024 through the respective circulars​​​​.

Key Provisions of the October 2023 Circular

The October 2023 circular, Policy Circular No. 06/2023-24, outlines several important points:

1. Exemptions for SEZ and Other Units: Special Economic Zone (SEZ) units and others like EOUs/EHTP/STPI/BTP are exempted from obtaining a 'restricted import authorization' for the import of IT hardware, restricted as per Notification 23/2023 dated 03.08.2023. This exemption is allowed solely for the captive consumption of these units.

2. Freedom for Spare Parts and Components: There are no import restrictions on spare parts, assemblies, sub-assemblies, components, and other inputs necessary for the IT hardware devices as specified under Notification 23/2023.

3. Exemptions for IT Hardware in Capital Goods: IT hardware items essential for capital goods are exempt from import licensing requirements. For instance, laptops/tablets accompanying specific machinery like MRI machines, CNC machines, UAVs, etc., are allowed. However, if the servers or laptops themselves are the primary capital goods, this exemption does not apply.

4. Provision for Multiple Authorisations: Importers are allowed to apply for multiple authorizations, which remain valid until 30th September 2024. Importers can also amend the quantities on a valid Import Authorization, subject to the overall value of the import authorization remaining unchanged​​.

Key Provisions of the January 2024 Circular

The January 2024 circular, Policy Circular No. 09/2023-24, provides further clarification:

• The circular specifies that the import of Laptops, Tablets, All-in-one Personal Computers, Ultra-small form factor Computers, and Servers falling under HSN 8471 is 'Restricted', and import should be allowed only against a valid Import Authorization for these five item categories. Notably, the Import Restriction does not apply to other goods such as Desktop Computers under tariff head 8471​​.

Implications and Impact

The DGFT's circulars reflect a strategic move towards regulating and potentially boosting the domestic production of IT hardware in India. By restricting imports and providing clear guidelines, the government aims to balance the needs of trade and industry with the objectives of self-reliance and technological advancement.

The restrictions mainly target high-import products like laptops and servers, while offering exemptions for parts and components, indicating a push towards encouraging local assembly and manufacturing. This approach could foster an ecosystem for IT hardware production within India, leading to potential job creation, skill development, and technological progress.

For the trade and industry, these circulars necessitate a strategic re-evaluation of their supply chains and procurement strategies. Companies reliant on imported IT hardware will have to navigate the new import authorisation process or adjust their operations to align with the domestic market offerings.

Legal and Policy Context

These circulars are set against the backdrop of India's broader trade and industrial policy, which has been increasingly focused on self-reliance, especially in strategic sectors like technology. The legal framework, primarily governed by the Foreign Trade Policy and various notifications issued by the DGFT, provides the government with mechanisms to regulate imports in alignment with national objectives. The October 2023 and January 2024 circulars are examples of how these mechanisms are employed in practice.

Conclusion

The DGFT's circulars of October 2023 and January 2024 represent a significant development in India's approach to managing the import of IT hardware. While they offer clarity and direction, they also pose challenges for businesses engaged in the import of these products. The long-term impact of these regulations will depend on how effectively they are implemented and how the domestic IT hardware industry responds to these new opportunities and challenges. As India continues to assert its position in the global technology market, such policy moves will play a crucial role in shaping the country's technological landscape.

Full Text:

Circular No. Policy Circular No. 09/2023-24 - Dated: 12-1-2024 - Clarification regarding Import Policy Provisions for Laptops, Tablets, All-in-one Personal Computers and Ultra Small Form Factor Computers, Servers under HSN 8471

Dated: 16-1-2024