Union Budget 2010 - Reactions from the IT Industry, Part III
IT News Online Staff
2010-02-26
Ajai Chowdhry, CEO and Chairman, HCL Infosystems Ltd.:
"Budget 2010 is the first budget after the global crisis. Overall the budget was well balanced and responsible. Various projects and schemes announced by the government will see increased role of Information Technology as an enabler towards more inclusive growth. The Union Finance Minister has also given us a clear direction on the roadmap for GST with a definite date for implementation i.e. April, 2011.
I am sure that the various measures announced today will go a long way to ensure proper focus on taking core sectors like education, healthcare, social security, rural development, national security and banking to the grass root levels. Further to this, deduction on In-House R&D has been increased to 200% from 150%, which will definitely help put back focus on R&D. Going forward IT will play an important role in driving these nation building initiatives across sectors."
Ramachandra Panickar, Chief Financial Officer, Intelenet Global Services Ltd.:
"I am disappointed that the tax holiday under Sec 10A and 10B has not been extended. The BPO industry is a young industry as compared to the IT industry. A longer term extension of the tax holiday would have certainly been beneficial considering our export-oriented revenues have been affected by the global recession as well as pressure on price. We are also disappointed that the Minimum Alternate Tax (MAT) has been increased from 15% to 18%.
On a positive note, the direct tax breaks for employees with salary levels less than Rs. 8 lakh will help employees have more money in hand for consumption and savings. I am also happy that the service tax has been retained at 10% and the process has been streamlined to enable exporters to get a quicker refund."
Andrew Horne, Managing Director, Xerox India:
"The Union Budget for 2010-2011 is a budget in the positive direction. The impressive growth of the manufacturing sector in the third quarter of current year has reinforced that the economy is reviving, but we need to move ahead with caution. With the continued support from Government on stimulating the economic recovery, the industry will be able to strengthen itself further. The Technology Advisory Group for Unique Projects (TAGUP) is a recommendable initiative of the Government and a step closer towards e-Governance. In addition, for MNCs, simplifying the FDI policy would help to improve the overall investment environment.
For the common man, the reduction of customs duty, central excise duty and special additional duty in certain goods and commodities critical to SMEs and SMBs will be beneficial for the Indian household. The tax slab for the personal income and investment will also give a boost to the average mid level income group.
Overall, the budget has a vision to globalize India."
Rajan Sharma, Sales Marketing MB BU, GIGABYTE India:
"Given that the industry is still in a recovery mode the tax incentive should have been extended. The rolling back of excise duties may affect sales. There has been no proposal to abolish Special Additional Duty (SAD) across products, which is discouraging. We are glad that the roadmap for GST has been finally unveiled, which is very critical for creating a single-India market. We hope for better involvement and engagement of the Government with the industry as the finer details of the GST is worked out."
Ambrish Bakaya, Director- Corporate Affairs, Nokia India:
"The Union Budget 2010 is a progressive and growth oriented budget reflecting the Government's commitment towards driving inclusive growth and a strong development focus, along expected lines. The Budget has addressed key areas including education reforms, infrastructure spending, rural sector, and supported overall business and consumer concerns, including a focus on bringing back fiscal discipline and prudence.
We believe that this budget reflects the Government's disposition towards increasing employment, productivity, skill building and domestic demand and increasing India's global competitiveness through necessary policy intervention and investments.
Specific to Telecom:
Continued support to manufacture of mobile handsets:
We would like to thank the government on its proposal to extend the benefit of exemption of Special Additional Duty of Customs (SAD) of 4% on parts imported for manufacturing mobile handsets from July 06, 2010 to March 31, 2011.
Manufacture of parts/accessories of mobile handsets:
The Union Budget 2010 has also responded positively to the industry's request on manufacturing of parts and accessories of mobile handsets in India. The budget proposes to remove the 24% import duty on components/raw material imported for manufacture of batteries, chargers and other part and accessories. The will help bring more investment in the area to the country and encourage domestic manufacture of parts and accessories. We believe these moves are extremely encouraging to the category, and will help catalyze India's emergence as a global telecom manufacturing hub.
Simplification of refund procedure for import of mobile handsets:
Separately, the move towards exempting the Special Additional Duty of Customs (SAD) of 4% on import mobile handsets is also a very welcome step. This duty was hitherto refundable on payment of VAT; this step will make the entire process of handset imports much simpler, facilitating better cash flow in the industry."
Govind Rammurthy, CEO and MD, eScan:
"There is a good and clear indication in the Budget 2010 that the GST is going to be a reality from 2011 onwards. The question as to whether the 2011 roll out of GST is practical or not is subjective, especially in a country like India, involving so many State governments, with different value base, political outlooks, regional interests, etc.
The Government has already placed the draft GST document open to public scrutiny and comments for quite some time now. Further, CMs/FMs of all different States have held at least seven meetings so far, to debate, highlight and sort out each State's issues/concerns on rolling out the GST as soon as possible. Despite all these, some of the States are still at a disagreement mode with the Center on some ground or the other, giving a clear signal that implementing GST with a consensus from all the state participants are practically impossible, at least in the near future.
In this scenario, however, from the language used in his Budget speech today, it appears that the FM is determined to bulldoze and get through on the subject (maybe through Central Government incentives or sharing of possible revenue losses with the State government, etc.), in the committed one year time period again. And knowing Pranab Mukherjee, this approach is quite practical and hence the GST rollout too, from 2011 as promised in today's Budget."
Ganesh Guruswamy, Vice President and Country Manager, Freescale Semiconductor India:
"Our Finance Minister Pranab Mukherjee has clearly outlined the core focus areas to achieve double digit growth in GDP over the next 3 years. To achieve this goal, we need to primarily focus on existing bottlenecks like Infrastructure, government systems and structures and fight corruption.
India's broad-based counter-cyclic policy package to respond to the negative fallout of the global slowdown has worked wonders in controlling the falling GDP. Today, sectors like Automotive and Manufacturing have already shown double digit growth, which should propel other allied industries to grow as well. Liberalization of pricing and payment of technology transfer fee and trademark will boost the foreign investment environment.
The heavy stimulus package provided to the Agricultural, Infrastructure and Energy sector shows the Government's focus towards achieving overall growth.
In addition, the Karnataka government recently announced its Semiconductor Policy, the first of its kind by any State, which is aimed at augmenting the $120 billion electronic system design and manufacturing industry in the State. The policy has also put in place a proposal for setting up labs for testing chips.
These are strong indicators for a bright year ahead for the semiconductor industry and the country."
Gary Singh, Country Head, Obopay India:
"The budget proposal put forth by the Finance Minister has been very encouraging and will give a boost to the banking industry. Their proposal to reduce mobile phone rates will propel the mobile banking market. With allocating additional banking licenses and capital infusement, it will become mandatory for banks to reach out to villages and include them in the banking system. The UID program is also expected to enable the unbanked population for financial inclusion and act as a catalyst in helping banks in bringing them under the banking umbrella. To reduce operational costs, banks will start looking for additional avenues such as mobile banking and e-banking to promote microfinance and also banking transactions within the country.
These proposals will benefit the overall mobile services industry, by developing the local eco-system through opportunities to mobile manufacturing companies, banks and financial institutions."
Suman Reddy Eadunuri, MD, Pegasystems Worldwide India Pvt. Ltd.:
"The budget overall seems to be a progressive one. We welcome the tax sops announcement, which comes as great news for all the employees. The new tax brackets offer huge incentives to the working professionals and will enhance their purchasing power and to a certain extent saving power, thereby boosting the economy. Though rising inflation will be a worry, people will certainly increase their spending based on informed decisions.
Increased allocation for the education sector is a very good move as India, which is one of the fastest growing economy, needs to invest majorly in education and training that will help us in creating skilled and industry ready talent.
Announcement to enhance deduction limit for expenses incurred on in house R&D to 200% from 150% earlier is a welcome move again.
While we are positive about most of the initiatives introduced by the Finance Minister, as a representative of IT/ITES industry, which is a major contributor to country’s economic growth, we are disappointed to see no announcement regarding the extension of STPI scheme, which if not taken care will be a big blow to small and mid size companies. Though reduction in service tax for IT/BPO companies is a relieving point but absence of any clear direction on STPI benefits comes as a dampener.
Another disappointment is no change in ESOPS taxation as the profit on share sales should get taxed only when they are sold. No clear direction on CST and other taxes on exports is not very encouraging either."
Narsimha Rao, President, ITsAP (IT & Services Industry Association of Andhra Pradesh - Formerly HYSEA):
"The budget presented by the Finance Minister today is balanced with focus on Growth, Infrastructure development, Inclusive growth and fiscal discipline. There are number of positives in this budget including a clear roadmap for controlling fiscal deficit. The Technology Development authority headed by Nandan Nilekani to bring focus in the Government for implementing IT projects for Tax Administration (IT and Service Tax) and other Governmental initiatives is a good step. He has proposed significant funding for the UID project, has increased allocations for School Education and Infrastructure development, has announced a program for skill building in 50 crore people by 2012 and higher allocations for rural development. The reduction in Personal Income tax and introduction of additional investment incentives is a welcome relief for the large IT industry employees.
However, the IT industry would have liked to see the extension of the tax benefits under the STPI scheme beyond 2011 and no increase in the MAT. The increase in MAT is likely to impact the SMEs the hardest and was avoidable at least for the IT industry. Both these are missed opportunities for the Government to further boost the IT industry, which is recovering very well in the last 3 months and we hope these will be considered by the Government in the coming days."
Naresh Wadhwa, President and Country Manager, Cisco, India and SAARC:
"The budget this year would have a broad appeal in India, with a significant focus on inclusive growth and development at all strata. The emphasis on infrastructure development, both urban and rural, is both highly visible and highly welcome. It is heartening to see the significant rise in the allocation towards social welfare.
The 'National Clean Energy Fund' will position India as a leading force in finding ways to combat the imminent energy crisis. It will also simultaneously encourage research and technology projects in the clean energy space.
The proposed provision to simplify the FDI (Foreign Direct investment) model followed in India is also a welcome measure.
With the noble intention of spurring R&D across sectors, this budget paves the way for tax reforms on in-house R&D expenses, and also on contributions made towards scientific research to associations, colleges, universities and other institutions.
While research and development gets a leg-up, higher education and corporate tax reform waits for its turn. The UIDA took the lead among e-infrastructure initiatives, and broadband roll-out and major e-Governance projects still needs to be addressed."
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