Updated 23 May, 2013, 9:28 am IST
Budget 2007: IT Industry Speaks
| by Minu Sirsalewala |
Navinder Chauhan, Head, Marcom RPtech, India:
We don't see any real change or benefit from this budget with concern to our business. The FM has decreased the peak rate of the import duty from 12.5 percent to 10 percent. But the Educational Cess has been raised from 2 to 3 percent …so in essence we have a neutral reaction to this budget.
Sudhir Agarwal, director, sales, Motorola,- India, Nepal, Sri Lanka, Mobile devices:
We were expecting a lot of changes for the mobile handset manufacturing industry, but the budget has disappointed us. Firstly, we wanted the SGR liscensing to be delinked, or at least redefined, but that did not happen. Secondly, we were hoping for rationalization on customs duty for mobile handset accessories like Bluetooth headsets etc, which is currently as high as 35%. The government has not addressed any of these issues and in fact, the mobile handset industry as a whole, did not get substantial attention. For consumers, this will mean no change in prices of handsets, because the cost of manufacture and import remains the same for us.
Raj Saraf, CEO, Zenith Computers:
There is no change in the IT hardware Industry, so prices remain the same. We had not expected any changes, in fact, we had recommended that no changes be made. We are happy with the budget.
Infosys CFO, V Balakrishnan:
Infosys CFO V Balakrishnan said that the impact would be substantial for the industry, but a little less for his company as it pays slightly higher tax overseas (read the US) and enjoys double taxation credit. The net impact for Infosys therefore would be 1.5 % of its total net income.
i-flex Solutions CEO, Deepak Ghaisas:
According to Deepak Ghaisas, CEO, i-flex Solutions, “This is totally negative for the software sector since none of our issues have been addressed. He did not say anything about the continuation of STPI scheme nor was there anything concrete on SEZs. On the other hand, he has extended MAT to IT companies. They have also imposed a 1 per cent education cess.”
A spokesperson of TCS, said MAT extension to the IT industry would mean big erosion in profitability of the company.
Nucleus Software MD, Vishnu Dusad:
According to Nucleus Software managing director Vishnu Dusad, "It would have been better if the government had looked at the positive benefits of higher personal income tax from the IT professionals, rather than trying to erode our margins so seriously.”
Netaquila Solutions VP, Ankur Rohatgi:
Ankur Rohatgi, vice-president of Delhi-based software solutions firm Netaquila Solutions said, "This is quite serious. We will have to re-evaluate our pricing with our clients. And if we can't recover MAT from our clients, we won't be able to continue. Our margins and that of smaller companies are so very low.”
The IT industry's ESOPs have also been brought under the fringe benefit tax (FBT) audit.
"FBT on ESOPs is in any case mindless in my opinion. An executive going on a business trip also comes under FBT. Where is the fringe in that? Besides, ESOPs have in any case failed. People get equity, but not options. Most companies have moved away from the options scenario due to the volatile stock markets," added Rohtagi.
Oracle India Managing Director, Krishan Dhawan:
Given the positive growth trajectory rate, there was no need for a dramatic change in the budget. It is good to see the fiscal deficit under control. I would first like to congratulate the Finance Minister for boosting the share of education and healthcare, both essential for overall development. Education, as I have often said, needs greater attention, as this is where the future lies. Proper training and skill sets need to be imparted to our youth if India is to attain and maintain top rank in the global digital economy.
There is continued interest in supporting e-governance initiatives. The increased budget allocation for e-governance at the center and state levels is a step in the right direction.
Also targeted funds allocated for computerization of the Public Distribution System can aide in enhancing the country’s food supply chain to ensure the supplies reach where they are most needed.
There are four IT industry implications in this budget:
While the budget stands for stability and continuity of sound policies, for the IT industry I would rate it 5 on 10.
Samsung Telecommunications India:
Our request to simplify duties on telecom sector has been addressed. FM’s request to Department of Telecommunications for unified tax structure is a positive step. Presently, the sector is suffering from the problem of multiaxing like service tax, license fee, spectrum charges, asset deficit charges, and education cess. Such a tax system was adversely affecting the elecom growth.
This budget will also benefit the growth of rural telephony. FM’s announcement for allocating 4000 crore for rural road and increase in agricultural investment to upto 2% of the GDP will improve the rural infrastructure and increase the individual purchasing power, thus increasing the rural phone penetration level.
Development and supply of content for use in telecom and advertising have been bought under the Service Tax rate. This will only dampen the growth of VAS which is key revenue earner for the telecom sector. Advertising being the key marketing tool will become costlier and thus will affect this industry badly. In such price sensitive market FM should have been more sensitive to the industry. Apart from this additional burden of 1 percent additional Cess is also a disappointing move.
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