Nothing much in the budget for IT

MUMBAI, INDIA: Amidst the sluggish business and economic scenario, the Indian IT sector was hoping for some key initiatives and policy reforms in the union budget for fiscal 2012-13 that could provide a big push to this sector.

However, after the finance minister's budget speech today, the Indian tech industry felt that minister hasn't done much for the sector and there's nothing much in the budget for IT.    

"Nothing much in the budget for IT and not enough focus on incentives for skill building or tier 3 cities. The announced advance pricing agreement (APA) may help transfer pricing decisions and the USD 1 billion venture captial fund focused on micro, small, medium enterprises (MSME) is good for entrepreneurship," says Ganesh Natarajan, Zensar Technologies's president & CEO.

It's the same UPA government which had drafted a new electronics manufacturing policy to boost the industry in India last year. And the government was expected to implement this new policy under the 2012-13 budget but failed to live up to those expectations.

According to Alok Bharadwaj, Canon India's senior vice president and MAIT president the budget has two parts — sentiments and substance.

“On sentiments, the budget looks very positive with some long term growth initiatives such as GST, spending on infrastructure, foreign direct investment (FDI) in retail and others, but when it comes to substance it is a mix of good and bad,” Bharadwaj reacts.

He added that the IT industry was really looking for big enhancement and initiatives for manufacturing of IT goods. 

'But I feel the government could have done much better for the IT goods manufacturing sector as it  missed lot of things and missed a big opportunity,' Bharadwaj adds.    

Apart from exempting custom duty on LCD, LED and mobile phone parts, there's not much to cheer for the IT good manufacturing sector in this budget.

While, the growth of Indian IT sector largely comes by providing IT based services, but the latest hike in service tax from 10 to 12 per cent in budget is considered as unwelcome move.

“The increase in the service tax rate is definitely a mood dampener for the IT industry but it may not have a significant business impact as users of IT services are essentially companies in which such services are being increasingly used in mission critical applications,”says Richard D’souza, Melstar Information technologies Ltd's CEO.

Ashish Hemrajani, founder and CEO, Bigtree entertainment Pvt. Ltd’s BookMyShow.com said "The service tax exemption on the entertainment industry is a very encouraging step. It would propel the industry towards bigger and better things. This move can also be viewed as a way to offer some respite to the previously challenging situation the industry faced due to heavy taxation"

Overall, the 2012-13 budget hasn't give much for the IT sector to cheer upon and so will have to wait for a year when the finance minister present a new budget for fiscal 2013-14.