Budgets are for bores, let’s talk of golf instead

CIOL Bureau

BANGALORE: Budgets may come and budgets may go but the information technology industry will keep to its business. That is the new mantra of the IT industry, as we brace up to the finance minister’s Jaswant Singh to deliver his maiden budget proposal.

Remember this was not the case in the previous years. IT industry was lobbying hard, especially, the software exporters for sops. Corporate tax holiday, zero duty for packaged software, exemption on dividend tax, exemption on capital gains, depreciation on capital expenditure, reduction in customs duty on hardware components, rationalization of excise duties and the list goes on.

Today, the IT industry has achieved most of their goals and the few unfinished portions are those about excise duties and customs duties. The latter has been automatically been rationalized to the levels of zero to 5 per cent on most components due to India’s commitment to the WTO to reduce select component duties to zero per cent level.

In other words, this budget holds very little for the IT industry — no keystone announcements are visible. However, a few hearts will flutter even as the deep bass voice of Singh reads out the portions pertaining to corporate taxation on Friday morning. Will he withdraw the 10-year tax holiday announced by the prime minister? Not many are perturbed since they believe the government will not ‘cheat them.’ What has made the pitch queer is the utterances of Infosys CEO Nandan Nilekani inviting the government to tax IT companies. It is needless to say that not many approve of Nilekani’s opinion in this regard.

So what do industry associations expect out of this budget? Nasscom certainly does not expect any sops to be withdrawn including the tax holiday. Rather, it wants the government to commit that it would spend about 40 per cent of its IT expenditure (proposed at 3 per cent of GDP in 2001 budget proposal) on services. MAIT has given up its fight on making India a hardware base and says that now it’s the EXIM policy that they look forward to rather than the budget. "We have asked the finance minister to announce that duties on input material for hardware manufacturing will be lowered to make manufacturing a viable option in the country," said Mr Vinnie Mehta, executive director of MAIT.

MAIT expects a reduction of excise duty from 16 percent to 8 percent. It says this would help them stamp out the grey market.If there are any concerns it is for the traders and small and medium hardware manufacturers in the country. The excise duties, the CVD and the add ons are becoming a real headache.

The prospect of VAT being implemented across the country has sent in a wave of relief since it brings down cases of double taxation for traders thus helping them to be cost competent.

When CIOL informally polled industry leaders most had a generic expectation. That Singh will increase cash in people’s hand (read implementation of Kelkar Committee report in parts perhaps) and consumption will shoot in return. The economy will grow and this will bode well for the IT industry.

Are you thinking at last IT industry has reached the mainstream. Take a look at the industry. It is happy with the sops it has got so far. It will be happier to see them retained in their shape for a while.

So, shall we switch on the deep throat.