Budget 2012: Post-budget reactions from the tech industry

After putting forth the expectations of the tech companies from the Union Budget 2012, the budget, itself has invited mixed reactions from all quarters. While some tech pros found it balanced, some found it neutral, while others thought a lot was left out. The telecom sector seems to be the quite disheartened by the new budget. While it was maintained that the telecom sector has been playing a vital role in the growth and development of the nation, and everyone envisaged this growth to rise with reliefs in the sector, which would then accelerate the penetration of mobile phones manufactured in India, given the rollout of 4G, coming later this year, hopefully. The telecom sector has also been granted an infrastructure, which was on the wish-list of many.

On a positive note, mobile phones' spare parts have received 2 percent exemption from excise duty, leading to lower market prices of phones manufactured in India. While consumers can continue to sit back and chew on that one, the spoiler came in the form of a rising service tax, which would mean pricier mobile bills for the masses. 

Talking about consumer electronics, which the budget has hit, too by rising costs and depreciation of rupee, seems to have got no relief, either. Consumer electronics could get more costly. However, those wanting to buy LCD, LED TVs can now manage a smile, since the Union Budget 2012 offers full exemption from the Basic Customs Duty (BCD). Another aspect that the tech industry was expecting some reformation on is software. Clearly mentioned in the expectation about not treating software as good, hasn’t been paid any heed. Revisions in the Minimum alternate tax (MAX) has been also given a miss, which could have otherwise created a conducive environment and help attract foreign investment into the country. The Aadhaar tablet-enabled payments for various government schemes in at least 50 districts within next 6 month has been a welcome change, appreciated by many.

Here's what tech pros had to say post budget 2012 -

Hemant Joshi, Partner, Deloitte Haskin & Sells carefully puts across the positives, indirect benefits and negatives for the telecom industry. The positives, include introduction to viability gap funding for telecom towers, Mobile phone parts have been exempted from custom duty, enhanced budgetary allocation to healthcare / skill development, mobile (non-stationary) training centers and plan to use Aadhar for direct transfer of subsidy to end consumers, while the negative has been the telecom tariffs are likely to go up by 2 percent with increase in service tax. On another positive, government has finally decided to set up the GST network to be implemented probably by August 2012.

Sunil Dutt, Managing Director, Research In Motion India

“The Budget indicates some prudent steps towards fiscal consolidation and reflects that the government is sincere about the fiscal situation going forward. The proposed full exemption on mobile phone part may further make the smartphone affordable to larger section of the masses and basis the direct taxes, the increase in disposal income will further enhance the penetration of smartphones. Introduction of a constitutional amendment for GST is also a positive development,” Sunil Dutt, Managing Director, Research In Motion India.

The Cellular Operators Association of India (COAI), feels that the budget announced does not address critical issues related to the telecom as well as infrastructure sectors of the country. Apart from infrastructure funding provisioned to work through Gap funding and Mobile tracking for fertilizer subsidy, there are no major takeaways for the industry. Contrary to the recommendations put forth by the industry, no tax relief/benefits have been granted to the telecom industry, which keeps reeling under rising operating costs and deteriorating margins. Moreover, the increase in service tax from 10 percent to 12 percent will further affect the growth of the industry as it is detrimental to the objectives of rural penetration and affordable rates for the consumers.