Budget neutral for IT, really?

PUNE, INDIA: Budget 2008 did not turn out to be that eventful for the IT industry as expected by a large majority.

Sops did not come directly but the FM has touched the industry through tangents and indirect touchpoints.

To start with, there has been a proposal to enhance the allocation to the Department of Information Technology from Rs 1,500 crore in 2007-08 to Rs 1,680 crore in 2008-09.

However, the much-awaited extension of STPI tax holiday announcement was conspicuous by its absence.

For the hardware industry, excise duties on many IT components were reduced. Tax has been exempted on set top boxes.

Specified parts of set-top boxes, namely SMPS power board and IR module, for use in manufacture of set-top box, have been exempted from customs duty.

Concessional rate of five per cent customs duty was earlier provided on MP3 player or MPEG 4 players. Now all MP3/ MP4 or MPEG 4 players, with or without radio/video reception facility will attract five per cent customs duty.

Specified inputs and raw materials for manufacture of specified electronics/ IT Hardware items have been exempted subject to specified conditions. Vinnie Mehta of MAIT rates the Budget as a fine one.

"There were no changes wanted on a broader tax structure. We are glad with the approach on customs duty. The excise duty continues to be 12 per cent. There have been small sops on data cards with no countervailing duty. Overall this is a good and stable Budget for the hardware industry and infuses confidence and stability," said Vinnie.

Also, excise duty has been reduced from 16 per cent to nil on wireless data cards. Countervailing duty on wireless data modem cards with PCMCIA/USB/PCI express ports has been exempted by way of excise duty exemption.

These goods are already exempt from customs duty. However, four per cent additional duty of customs will be attracted.

In view of augmenting Internet penetration, 100,000 broadband internet-enabled Common Service Centers in rural areas, PDS, smart cards pilot project in Haryana, Chandigarh; Rs 75 crore for Common Service Centers Rs 450 crore for State Wide Area Networks (SWAN) projects in states and allocation of Rs 275 crore for State Data Centers are key points of emphasis.

Tax on convergence products has been reduced from 10 per cent to five per cent.

While there is expectation for the wireless industry to get a boost from these proposals and the excitement is being expressed, Muthu Logan, CEO of Brovis Wireless Networks, however, adds that relief on excise duties was announced last year too but the same has seen minimal impact.

"The duty regime is till high when compared to other countries specially with customs duties," he said.

The industry has welcomed the clarification that Software Testing Service provided remotely through Internet or any electronic network will be considered as Export of Service.

"Sec 10 A exemption to STP Units was expected be continued for a few more years and it was a dampener." Feels V. Sundararajan, CFO, Aztecsoft Limited.

From a duty reduction perspective, IT industry gets affected both directly and indirectly. There has been an explicit intent on bringing customized software at par with packaged software and there has been an increase excise duty from eight per cent to 12 per cent on packaged software.

This would lead to increase in the price of software for both the masses as well as enterprises, as pointed out by Sourabh Kaushal, industry manager, Frost & Sullivan, South Asia and middle East.

But the NCCD levy on polyester yarn has been diverted to cell phones.

In another important policy thrust, there has been an impetus on green and clean technology products.

"Starting three new IITs is an indication of the government's priority towards higher education. I hope, in this endeavor, the government will give private sector initiatives in higher education greater leeway and freedom. Overall, the budget will help India take its rightful place amongst the more developed nations of the world," says Aruna Katara, Executive Chair - I2IT.

Ask the IT Inc and there are mixed reviews on how the IT sector has been treated in Budget 2008.

IT has more or less been given a neutral treatment says, Amar M Karvir, Head Pune operatiosn, Aztecsoft as he wraps up the feedback from his CFO and executives.

"The spotlight has more been on agriculture this time." Rajendran, CMO, Acer India gives full credit to the Finance Minister in balancing various competing requirements by making some bold announcements that benefit the important sectors of education, health and agriculture.

Ashish Dehade, MD of First Advantage feels that by addressing the fundamental concern of employability and skill gaps that is required of human resources in the 1.1. billion population of India, FM has helped the industry in a big way.

"The Rs-1000 crore to be linked to knowledge institutions and the encouragement to Sarva Shiksha Abhiyan would help the industry on a macro level and eventual basis in a big manner. In fact, in that light there have been allocations of about Rs 3440 crore to UGC and Rs 3205 crore for technical education as per the Central plan 2008-09,” he said.

(pratimah@cybermedia.co.in)