Balanced Budget

DQW Bureau
New Update



the budget overall seems to be pragmatic and well balanced, it seems

to be a mixed bag for the IT Industry. Increased focus on

e-governance and consequent opportunities will be welcomed by the

Indian IT/ ITeS industry. Reduction in the current surcharge rate for

domestic companies (from 7.5 percent to 5 percent), coupled with an

intention to phase it out altogether, is also a step in the right

direction. Industry IT players with global footprint/ subsidiaries

could also seek to benefit from the concessional 15% tax rate, on

dividend remittances from their foreign subsidiaries. On the flip

side though, the absence of any extension of the tax holiday under

the Software Technology Park Scheme (particularly for the small and

mid-tier IT players), proves to be a dampener. Also, the levy of

Minimum Alternate Taxes on Special Economic Zone (SEZ) Developers, as

well as existing SEZ Units (at an increased rate of 18.5 percent of

book profits, such SEZ units being hitherto tax exempt), is a setback

for the industry which has been keenly looking at expansion

opportunities in SEZs.


the indirect tax front, the budget does not seem to have addressed

some of the key concerns of the IT industry in entirety. While

simplified procedures for service tax refunds by SEZ units, and a new

scheme for exporter of 'goods' have been announced, the challenges

currently being faced by IT 'service exporters' have not been



the demand for clarity on taxation of packaged software has only been

partially dealt with, by providing for an exemption from excise and

customs duty, on the value of licenses for packaged software without

MRP. The industry though was seeking comprehensive clarity under

various statutes, on the over-lapping tax treatment on supply of

'packaged software', vis-a-vis 'licenses' for packaged software. The

industry has also been extended some relief in the form of customs

and excise duty reductions on components of printers and DVD/ CD



a tax Policy level, the Finance Minister has expressed his continued

commitment to introduce the Direct Tax Code from 1 April 2012 and

take forward the GST roadmap (by seeking to introduce the necessary

constitutional amendments, model GST statute/ rules, etc). This

reiteration is welcome.


sum up, the budget continues to focus on growth, along with fiscal

consolidation and stability as its key themes. The IT Industry though

would believe that this budget could have delivered more,

particularly on the tax holiday extension, though this must be viewed

in the context of the Government's stated policy of convergence with

DTC proposals, and consequent phase-out of most tax incentives.