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When Pranab babu stood up to
read his budget speech the country waited to see what will the
experienced Finance Minister, who was giving his fifth budget speech
have in store for the IT sector in general and tax reforms in
particular. The channel community was particularly looking forward to
changes in central and state taxes since they have been battling
numerous layers of taxes for almost two years now. By the time the
speech ended, while the Sensex had jumped up
IT channel was not enthused.
The DQ Week team
spoke
to channel partners across the country to gauge their first
reactions on the budget and the IT channel gave a thumbs down to
Budget 2010.
When
contacted Rajendra Seskaria, Director of Kolkata-based Balaji
Solutions was enthusiastic about the lowering of income tax. “
my perspective, the Union Budget for this year has been wonderful,
especially on the income tax front. The government has come up with
means to reduce the impact of the rising prices on the consumers by
its income tax slab. This is good news, especially for the
middle-class families. Also, the excise duty, which has been raised
is just a nominal rate of two percent. I do not think that this
increase will have any negative impact on the business scenario.”
with his point of view, VK Bhandari, Director, Supertron Electronics
said, “The marginal rise of excise duty by two percent will not
deter the business functionality and removal of the upfront
refundable payment of four percent has been done away with. Now,
while paying for the excise, the companies will not have to stock
their circulating money and seek refunds on the same. So, it will
benefit the firms indirectly.”
according
to Hemant Chabria of Chabria Infotech, the rise in excise
duty cannot be ignored as it is bound to have an effect on software
piracy. “Software is already grappling with double taxation issues
and VAT. Now, with excise duty rising by two percent, promoting the
cause of genuine software would become more challenging and may deter
business growth.” Adding another note of caution in this regard,
Ashok,
Director, Futurenet Technologies, Chennai, said, “Hike in
excise would definitely impact the pricing of goods like IT hardware
and this may result in more cautious buying by the customer.”
on
the rise of petrol prices, PL Suhasaria of Caltron said that the
MRP may rise due to this, but that will not have any added effect on
the MOP. Patna-based Krishna Agency's Naveen Gupt
elucidated, “W
the
price of petrol increasing the logistical and transportation cost
will go up, which in turn will pull the MRP up. However, I expect
that this will not really affect the MOP and it may only rise up
marginally.”
GST:
Channel disillusioned
deferring
of the implementation of
to April 2011 was met with
understanding from some parts of the channel community. “GST
implementation takes time. It would have been better, had the GST
been implemented, but the government has its constraints.
Implementing GST may have opened up new business avenues, but
non-implementation will not leave the businesses paralyzed either,”
said Suhasaria.
Kapur
of Delhi-based Green Vision, said that he was not surprised at
the announcement regarding GST. “There was no way that the
government could have implemented it this year. At present, the tax
scenario is messy for the partners in various aspects. Firstly,
maintaining multiple offices in different parts of the country is a
great problem. The taxes vary from state to state, one needs to hire
a lawyer in each location and filling up of Form C for the movement
of goods is such a pain. All this would be gone once the GST gets
implemented next year.” Echoing Saket Kapur's sentiment, Alok Gupta
of Softmart Solutions said, “The
delay in the implementation of GST was something we knew already, so
there is nothing too surprising there.”
of
Krishna Agency agreed that dealers are still very confused about
the tax structure and while GST would have cleared it all, the
deferment gives everyone time to review and understand things
clearly.
Sampath Iyengar,
CEO, Sam7 Computers & Networks, was also sure that the government
would defer implementing GST this year. “India is a federation of
states with each state having different problems regarding taxation
issues at their own level. While there is a pressing need for
uniformity, it is not easy to do so practically speaking, and so I
knew this would happen. There is also a need for changing the
accounting practices and so a year should be enough time for us to
get ready to get on the same platform. Even when VAT came in, we were
impacted, but overall it brought in a system in place which is good
overall. On the other hand, duties like Octroi should go away,” he
said.
almost
the same sentiment Atul Hemani, Director, Omnitech
InfoSolutions, Mumbai explained why GST has yet again been delayed.
“It is understandable that the government has postponed GST because
they have had administrative challenges in implementation. Having
said that, it should have been done earlier. Currently it is as if
there are different countries within India, with each charging their
own tax rate. A single taxation system is the need of the hour. With
this postponement those who were planning to expand their business to
other states in the country will find it a challenge to continue
dealing with multiple layers of taxation and this could impact their
overall growth adversely,” he said.
some
dealers were left disappointed as the government had gone back
on its promise about GST implementation. Expressing his sentiment,
Abraham Chaly, Director, Divya Business Systems, Cochin remarked,
“Now that they have postponed GST, it yet again proves that this
government has a history of postponing decisions and it is not a good
practice. Also, with the hike in excise duty announced, vendors are
bound to pass this on to customers, thereby increasing the end-user
price. With regards to the hike in fuel prices, there is bound to be
a trickle down effect across all sectors with some having a more
direct impact than others.”
Ranganathan,
CEO, Veeras Infotek, Chennai, expresses skepticism about
the government's seriousness on GST. “I doubt if the government
will implement GST by 2011 even and it remains to be seen if it will
happen. As far as Veeras is concerned, while it has been announced
that they are not touching service tax on packaged software, there is
an addendum clause which says 'subject to terms and conditions'.
Since we are in the packaged software space, we definitely want to
know what these terms and conditions are as part of the add-on
clause,” he said.
disappointment,
Chabria of Chabria Infotech said, “We were looking
forward to GST as the savior in this field so that uniform prices can
be secured and the incidence of taxation become clearer, but now,
with GST postponed till April next year, the scenario has become very
discouraging.” Echoing Chabria's point of view, Ramesh Ra
Proprietor,
Sree Balajee Computers, Visakhapatnam, explained,
“We are looking for the implementation of GST so that there is
uniformity across states. Instead of hiking excise duty which may
tend to affect the common man, they should hike the entertainment tax
to generate revenue.”
to
his comment, Rajeev Khanna, President, JCDA said, “Though we
were waiting for GST to be implemented, we knew a month ago that the
implementation would be delayed. At present, one state is trying to
outdo the other in increasing the tax rates. One percent increase in
VAT rate from four to five percent was announced, the
Government
also increased the VAT rate to 5.5 percent. This would not
have happened if a standard GST was levied all across the country.”
No problems with MAT
Talking
about
the hike in MAT rates,
Mathkar,
Director, Wysetek Systems said, “As far as hiking MAT is
concerned, it will not have a huge impact on SIs and SPs like us but
it seems to be more oriented toward larger enterprises like the
Bhartis and Reliances of the world.” On a similar note, Gupta of
Softmart Solutions added, “The increase in the MAT rates are only
applicable for people who have a turnover of more than Rs 500 crore,
which are usually large corporate houses. Traders like us will not be
affected by it. Adding to the point, Sandeep Parasrampuria, Director,
iBall said that it will definitely affect the biggies like the
Reliance who take advantage of the tax and as far as the small and
mid-sized companies are concerned, they will not be really concerned
about the same.
Overall impact
Ashok of Futurenet
Technologies, Chennai felt that the budget did not have much to write
home about. “Overall it has been a normal budget with nothing
specific to really boost growth however one disappointment from our
perspective is that nothing has been mentioned on the removal of dual
taxation when it comes to packaged software. There is already a
pending dispute on this front because of how the software is
defined,” he said.
Summing
it
up, Puneet Singhal, President, CMDA said, “To my
knowledge, the IT sector was not even mentioned in the FM's speech.
So, I do not really know what it holds for the industry. In my
opinion, the implementation of GST is something I do not see
happening even in 2011. I really do not think our government has
reached the level of preparedness as yet and would take a longer time
to reach a decision on it. But,once it is implemented, it will
certainly provide a lot of benefits to the traders in the IT
industry. Overall, the budget has provided a bit of relief to the
middle class of the country by increasing the personal income tax
slabs. Now, the buying power of people would increase as well.”
(With inputs from Bharat Sharma in
Delhi, Avishek Rakshit in Kolkata and John Jacob in Mumbai)