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Budget 2007: Services
By: Minu Sirsalewala   |   Feb 28, 2007
E-Governance

Strong support from the center for e-governance. Increased fund allocation from Rs 395 Crore to Rs 719 Crore for 07-08.

Central government also extends support for projects at the state level. Allocates Rs. 500 Crore for 07-08.

Also allocates Rs. 33 Crore for new scheme for man power development for the software industry.

Tech Education

Higher tech education spend hiked to 34.2%, positive implications for NIIT, Aptech etc.

Telephony

DoT asked to constitute a study on the prevalent levies with regards to the constant request from the telecom sector for unified tax regime.

In a bid to keep the rural Indian in focus the FM has targeted to expand the rural telephony to 20,000 more villages.

Though no revisions were made the FM has asked DoT to constitute a study and present their suggestions for a uniform Tax regime.

Enterprise Services

SMEs with taxable income of Rs 1 Cr or less exempted from surcharge.

Pass-through status for VC investments in Biotech, IT and Nanotechnology.

MAT: IT cos to pay 11.22% of adjusted book profits.

Tech incubators get service tax exemption.

Software
Not a favorable move as Government has tweaked the MAT definition and proposed to extend minimum alternate tax (MAT) to firms claiming deductions under sections 10A and 10B of the Income Tax Act.

They brought IT/ITES sector under MAT. Now IT companies have to pay 11.22% of adjusted Book profits, which is negative for IT industry (software companies).

India's export-oriented enterprises such as in the thriving software outsourcing industry were brought back under the tax net and now, they will pay the minimum tax, still lower than a full-fledged corporate income tax, practically seeing an end to their tax holiday status conferred years ago.

Chidambaram, in his earlier tenure as finance minister a decade ago, introduced MAT as a way of taxing companies that weren't paying any tax by availing various concessions.

Broadband Internet – No implication

Leased lines – No implication

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