BANGALORE, INDIA: The three per cent increase in minimum alternative tax (MAT) to 18 per cent from 15 per cent for the next fiscal in the budget would impact small and medium IT companies, Infosys director T.V. Mohandas Pai said Friday.

"The increase in MAT will not impact the larger companies as much but will impact smaller and medium enterprises (SMEs), particularly in the IT sector, as they would have to pay more," Pai said in a statement here, reacting to the direct tax proposals in the budget.

MAT is charged under section 115JB on the book profit declared by companies. Credit for MAT, however, can be carried forward under section 115JA for five years.

Noting that the IT industry did not receive any mention in the budget, Pai said the main request to extend the Software Technology Parks of India (STPI) exemptions (tax holiday under sections 10A/10B) has not been considered.

"The indirect taxes going up to 10 per cent from eight percent, particularly excise duty of petroleum products, is inflationary and a cause of concern as they would increase the cost of goods, affect production and hurt the entire economy," Pai, who is also head of the human resource department in the IT bellwether pointed out.

"The increase in indirect taxes will also hurt the local industry because imports may become cheaper," he added.

Echoing Pai, Infosys chief executive Kris Gopalakrishnan said the increase in excise duty, crude oil and petroleum products was a cause for concern as they were inflationary in nature.

"The budget has been focussed on fiscal consolidation. The projected reduction in the budget deficit to 5.5 percent from 6.8 percent is a positive development, as the country strengthens its growth after the recovery from the global recession," Gopalakrishnan said in a statement.

But he regretted that the budget had no focus on higher education.

Wipro executive director Suresh Senapaty said Finance Minister Pranab Mukherjee had taken a bold step to trim the fiscal deficit to 4.1 per cent by 2011-12, thereby delivering on his promise to focus on fiscal consolidation.

"The budget is growth-oriented and progressive. Betting on buoyancy in the Indian economy, the finance minister has withdrawn the stimulus incentives in a calibrated manner," Senapaty, who is also the chief financial officer, said in a statement.

From an IT perspective, Senapaty said it was heartening to see the government's resolve to leverage technology for e-governance, goods and services tax (GST) implementation, tax administration etc.

"Clarifications on Section 10AA and continued encouragement for (Special Economic Zones)SEZs will go a long way in promoting exports," he added.

EMC Corporation India president Manoj Chugh said the focus on deployment of IT for mission mode projects like commercial taxes augured well for the industry.

"Increased budget for the UID (Unique Identification) and the formation of the technical advisory group under Nandan Nilekani is laudable. We are happy to see significant enhancement in funding for education and rural and urban infrastructure, which will drive demand for IT products and services," Chugh said in a statement.
© IANS