As the initial hysteria settles down with today’s post-Budget speech, IT industry veterans from all walks like IT services, hardware and software sectors, elucidate about its impact on IT. The industry verdict is clear- while they all appreciate this being a populist budget focusing on agriculture and infrastructure, they have little to benefit from excise sops. Status quo in corporate tax was an additional dampener.

The Industry Reacts

Naresh Wadhwa, President and Country Manger – India and SAARC, Cisco appreciated the social implications of the budget. Specifically, he adds, “The vision to drive inclusiveness through technology gets a definite impetus with the proposals to set up 100,000 broadband-enabled common service centres in villages, connecting knowledge bodies and providing major universities with broadband services. Allocation of funds to accelerate power reforms and construction of roads will boost infrastructure development. The approval and fund allocation towards the state Data-centre scheme will help take the benefits of IT to the grass-root level.”

“Deduction of excise duty from 16% to 14% will also help raise IT product demand and constrain inflation in other sectors,” said WeP Peripherals in their official communiqué praising the Budget.

Wadhwa however, felt that the raised tax slabs could have been applied to corporate taxes too. “However the exemption of customs duty on specified parts of set top boxes and certain raw materials used in the IT/ electronic hardware, as well as reduction in excise duty on Wireless hardware cards and customs duty on convergence products are a welcome measure for the industry,” he concludes.

Elaborating on the flipside, even the Sify management feels that the corporate tax should have been reduced to stimulate growth. Vijay Kumar, CFO, Sify Technologies adds, “It is also unfortunate that the service tax on cyber café and broadband services have not been removed, nor has the duty on PCs and laptops been brought down further. These would have been positive measures to spur the growth of PC and Internet penetration and use in the country at a time when we are faring very poorly compared to even other developing countries."

Providing us the service providers’ perspective, Kumar says, “The measures on income tax revision, reduction in the general CENVAT rate on all goods from 16% to 14% to stimulate the manufacturing sector, reduction in duty on convergence products from 10% to 5% and full exemption from duty specified parts of set top boxes and specified raw materials for use in the IT/electronic hardware industry are all welcome steps.”

Other players including EMC appreciated the setting up of additional IIT's and a fund for improving employability of workforce as positive initiatives addressing the manpower needs of the technology sector. Manoj Chugh, President, India and SAARC, EMC Corporation says, “We are also encouraged by the reduction in custom duties for IT hardware components, as it will lead to lower prices and higher consumption in the domestic sector.”

Debasis Chaterjee, Director, NetXcell says, “Excise duty on packaged software increased to 12% from 8% is bad news for SMEs. There is no change in corporate tax in spite of 40% additional tax revenue collected in this financial year.”

Ramesh A. Vaswani, Executive Vice-Chairman, Intex Technologies expressed dissatisfaction saying, “In IT hardware, it is disappointing that exemption from customs duty has been restricted to very few items.”

Nasscom Wish-list Ignored

Much to the industry’s chagrin, the Nasscom Budget wish-list was completely ignored. The list included
• Continue the STP scheme and tax incentive under section 10A/10B beyond 2009, for the next ten years
• Allowing full credit for taxes paid in foreign countries
• Refund of service tax paid on services utilized for export of computer software and BPO services

All in all, while farmers, tax payers and women have a lot to take home with latest relief schemes, the overall IT industry does not have much to cheer about.