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Ravi Pandit
It is rather unfortunate that MAT has been introduced for companies who are tax exempted under Section 10A & 10B. In the sense, this goes against the promise under Section 10A & 10B under which many companies have made investments in this business and in this country.
The change in the MAT will affect all these companies. Hopefully many IT companies will get credit for the tax that they pay in foreign countries.
The net impact of this provision could be in the range of 0.75 per cent to 2.00 per cent of revenue for most of the companies.
The investment in the education sector and vocational development are certainly welcome. This should, if well spent, help the entire economy including, of course, the software sector.
The benefit of computerization in Government operations is indeed very welcome – not from the point of view with benefit to the IT industry but from the point of view of benefit that it could provide to the economy as a whole. Many studies all over the world have shown that investments in information technology accompanied by better business management practice yield significant benefits. Hopefully, the proposed announcement in the budget should help the economy as a whole.
There should have been some statement regarding the STPI benefits under the present frame-work. The benefit will lapse in 2009. I hope that the introduction of MAT translates into continuation of Section 10A & 10B.
My expectations of the budget were based on certain understanding of the current economic situation which to me is characterized by the following:-
High GDP growth, better performance on revenues/fiscal deficit; growth in manufacturing not accompanied by significant growth in employment in the organized sector; increase in inflation; low growth in agriculture and therefore, in rural incomes; general disconnect between those who are progressing and those who are not.
In the light of these effects, one did expect the budget to have the following characteristics:-
a. No significant reduction in taxes
b. Reduction in customs and excise
c. Significant addition outlays in agriculture / rural areas.
The budget conforms to these views.
One had not expected the provisions regarding the MAT, Stock Options or dividend distribution tax. In my opinion, they are simply not justified, nor can they have any constructive impact. Far more investments are planned on infrastructure, education, health and rural areas. Considering the general inefficiency of the Government expenditure on various development schemes, one wonders whether we would get the desired benefit out of all the well-being schemes proposed. There is a great need for an audit of the actual benefits of the expenses incurred in the recent past. There is also a need for supplementing the development efforts of Government with the efforts by individuals. There is a great need for public-private partnerships in these areas.
(The author is Chairman & Group CEO , KPIT Cummins Infosystems Ltd, and executive council member of Nasscom. The views expressed here are personal) .
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