Budget fallout: Karnik fears spur in piracy

Pragati Simlote

NEW DELHI: The eight percent excise duty imposed on packaged software sold over the counter is expected to have a negative impact on the growth of the Indian software industry.

Apart from increasing the price of packaged software, this move could also spur piracy.

NASSCOM president Kiran Karnik said: “It will be a setback to efforts to promote IT utilization in the Indian economy and for vital applications like education and health. This move would spur privacy and act as deterrent for small domestic companies who are coming up in the software area. At a time when technology and market demand were driving down prices, we see this as a retrograde step”.

According to Karnik, NASSCOM would wait for a few days and study this development before putting the case of the IT industry in front of finance minister P Chidambaram.

He added, “We feel this is an intended consequence of adjustments of excise, countervailing duty, etc. and hope that the Finance Minister will correct this aberration.”

Expressing his happiness over changes in Fringe Benefit Tax (FBT), he said, “Changes in FBT is good news for the BPO sector, as it would lead to reduction of FBT to five percent for some heads for which the BPO sector was earlier paying 20 percent.”

He added, “But the increase in service tax and broadening the net to cover some previously excluded IT-related services will not only raise costs, but will act as a deterrent to outsourcing work to SMEs.”

Karnik said that issues regarding interpretation of Section 10A benefits have not been addressed in the Budget.

“This is a long pending demand and we hope that the Finance Minister will settle them separately and quickly, so that unnecessary tax demands are not raised on the industry,” he added.

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