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Pre-Budget Expectations

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DQW Bureau
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Shankar Bhaskaran,

VP-International Business and Head-India Operations of

Bengaluru-based MetricStream

“One of the most highly

anticipated decisions is around the extension of tax holiday, which

expires for all STPIs in March 2011. The increase in tax at this time

would throw the currently volatile software industry out of balance

and will our ability to deliver international quality solutions at

competitive prices especially at a time when most of the world

economy is still coming back to normalcy after the economic crisis

and budgets are low. The non extension will impact numerous small

and medium companies drastically.

The other clarification

which most organizations in the IT industry are awaiting is the

debate around central tax on software as a service and the state tax

on software as a product, this double taxation limits the capability

for

many organizations to procure genuine software for internal purposes.

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With the GST roll-out

pushed out by a year or two further investment in ACES Automation of

Central Excise & Service Tax projects should propel the growth in

the IT sector.

We are also hoping for a

further ease in the process of refund of accumulated credit to

exporters of services by making necessary changes in the definition

of export of services and procedures will help the IT sector

especially the BPO's.”

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Ganesh Guruswamy, VP
and Country Manager, Freescale Semiconductor India

We expect the government
to take significant measures to maintain a good annual growth and

continue to focus on inclusive growth. Growing inflation is a cause

of concern for the nation. This could put an increased pressure on

the cost competitiveness of the country subsequently affecting the

growth.

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India is a dominant player

in the global software arena, but lot needs to be done to create a

strong presence in the electronics hardware industry. The Indian

semiconductor industry is investing more and more in Research &

Development. According to a study by global consultancy firm Ernst

&

Young, the Indian market will clock the fastest compound annual

growth rate by 2020, more than double that of China and the triad of

North America, Europe and Japan. However, if you compare India's

contribution to the global semiconductor industry, it is about 2

percent. We have lot of opportunity to grow the industry and the

stimulus package for allied industries like IT, Telecom and Auto will

definitely provide impetus to the semiconductor industry in India.

The government needs to support and fund the Research &

Development which will subsequently lead to building a strong

intellectual property for the country. Innovative semiconductor

applications can build the future of the nation as they contribute

extensively to building smart infrastructure for the citizens. The

latest innovations in embedded technologies in the field of energy

management, education, medical etc has only brought down the cost and

bridged the perennial digital divide.

As the industry continues

to invest more and more, the government needs to address the issue of

Transfer Pricing (TP) which remains a concern to all Multinational,

IT and Semiconductor Companies operating in India. A report on TP

audit completed till assessment year 2007- 2008 indicates a trend of

greater scrutiny, leading to increased adjustments and resultant

litigations with an estimated addition of INR 42,500 crore (US$9.4

Billion). If the government targets a steady increase in tax/GDP

ratio, the amount of cumulative transfer pricing adjustment over the

next five years could be a staggering INR 122,000 crores (US$27.1

Billion). Advanced Pricing Arrangements (APA) would provide an

opportunity to resolve potential transfer pricing issues in a spirit

of mutual agreement and cooperation rather than the adversarial

litigation environment.

Another important aspect

of growth is India's automobile industry that has emerged stronger

with all segments registering record breaking numbers. Government

needs to capitalize on this. There is a need to develop and modernize

the infrastructure for SMEs involved in auto components manufacturing

to improve the competitiveness of the industry. It is important that

we look at auto not only for the indigenous market but also aim to

become the largest export hub. We expect some measures from the

government to provide stimulus to the automobile industry.

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lang="en-US">Government should also

look at the

investment in the education sector to make education accessible to

all. Investment should be increased towards building an IT

infrastructure that will subsequently take education to all strata's

of the society.
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Altaf Halde, Country
Director, Sophos India



With the budget
approaching, every organization has set up their expectations on tax

exemption at the top of the agenda.

There is growth expected in education, infrastructure and IT sector.

Also, extensions on the tax sops

including units in STPI and Tax corrections would surely help the IT

industry.

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In specific context to IT industry, it deserves its importance. The

whole world is looking at India as a growing economy with potential

market and IT is one of the biggest contributors to that. Looking at

the current overall scenario in the country with scams erupting every

day, it is very important for the FM to keep transparency and the

overall growth of the economy as the prime focus. This should be

coupled with controlling the prices and encouraging the rural areas

of the country contributing to the higher growth of the country and

also by making an exemption of the service tax for a period of five

years which will surely help the penetration of Broadband services.



S Sriram, CEO, iValue
InfoSolutions

We expect tax sops to

individuals to reduce the impact of inflation either through raising

the slabs or reducing the tax rates. We also expect reduction in

corporate tax rates to compensate impact due to raising cost. Higher

borrowing rates are making life tougher for SMEs, who are already

reeling under the impact due to long periods of high inflation rate

and intervention from government to help this critical sector during

budget will be most welcome. With good progress made on both direct

and indirect tax collection, Cess introduced can be done away with

reducing the burden on corporate and individuals.

We expect tax sops for IT

service business to come to an end. It would be great if the scheme

is extended for small and mid-sized organizations, which still

require tax sops to compete and grow in tough global market

conditions with rupee showing signs of appreciating steadily along

with cost escalations. GST rollout with clear clarity on tax

structure for various goods and services will help domestic IT

industry. Custom duty and VAT rates reduction will help various

businesses adopt and leverage IT to compete better. With very high

interest rates, TDS rates should be made flexible to ensure working

capital is not locked for years with government, choking the growth

momentum.

For India to grow and

ensure young populations are employed, business needs to prosper. IT

helps business enhance efficiency and reduce cost. Hence, Government

should encourage business to adopt and benefit from IT investments.

Government itself over the past few years is one of the drivers of

adoption of IT through its e-governance projects benefitting both

citizen and government immensely. With a large young population we

should ensure they are educated and employed in a constructive way so

that we seize the opportunity to graduate from a developing economy

status.

Focus on governance issues

and take strong preventive and corrective actions to avoid spate of

scams hurting India's image and progress. Widen tax base and reduce

burden on salaried class reeling under inflation challenge. Reduce

tax rates and enhance compliance and collection which is a proven

success already in India. Focus on education and health as India's

future depends on how we engage the large and upcoming young

population. We should do everything possible to make this our

strength since the same can become the biggest threat if we don't

engage them right!. Fasten investment on infrastructure aspects like

power, road, etc so that they don't become a bottleneck to our

growth. Government should further leverage IT to reduce corruption,

enhance transparency, increase effectiveness of various programs to

the needy. Let us together seize the opportunity to put India on the

global map.

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Sudhir S, MD, Inspan
Infotech

Abolition of SAD-Special
Additional Duty should be completely removed as claiming back becomes a

tedious process,

it effects the cash flow of the company and gives way for additional

infrastructure

which becomes an additional cost to the company.

Unified Tax Structure-A

unified tax structure should be implemented across the country which

will indeed reduce

confusions on tax issues. The entire market should be treated as one

market benefiting it to every

individual company. Each state carry different Forms and procedures

for sales tax and it needs to

be simplified.

Rationalize Duty Tax-The

duty imposed on the MRP should be reversed and duty should be on the

purchase value.

Present policy is leading to uncompetitive pricing and confusion.

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Gaurav Ahluwalia, MD,
R&M India

India needs an economic
environment that facilitates growth and investments. Hence, having

measures in place that

encourage investments, both domestic and foreign are welcome. More

SEZs and STPIs will encourage

and channel more investments into the IT industry benefiting several

related industries

including structured cabling.

Lower custom duties for

cables and cabling components to make high quality, imported products

available at lower rates,

to customers in India. The custom duty is greater than the excise

duty. This can be lowered to

encourage a competitive environment where domestic and foreign

players can flourish, providing better

products and services, ultimately benefiting the customer.

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Shibu Paul, Country
National Sales Manager, Array Networks

With
the budget approaching many would have lots of expectations from it.

Is it going to work for individual

benefit or corporate benefits would be the issue for most.

Expectation like Income Tax sops for common-man by way of increasing

the exemption level to 20 percent taking inflation into account (at

close to 15 percent) and also not bring down the inflation (esp food

inflation) which is hindering the overall growth.

This

year is expected to see an acceleration in implementation of GST,

reduction in dividend distribution tax, enhanced depreciation on IT

products for competitiveness of MSME, additional depreciation

on pollution control and energy saving equipments, tax exemption for

Indian R&D companies,

tax consolidation in holding company structure, policy on development

of bond market, Capex-based subsidy payment to fertilizer companies,

infrastructure funds set up by government, e-filing of tax returns by

foreign companies and residential status of expatriate employees.

With

Indian IT industry back on secular growth trend led by strong growth

in export market is not expecting

extension in STPI scheme. Moreover, expect increase in MAT(Minimum

Alternate Tax) rate

to 20 percent in FY '12E from 18 percent in FY '11E as stated in the

latest version of Direct Tax Code (DTC).

Looking

into

India's development rate if service tax is removed from

consumer broadband services which

could help higher penetration and effective services. But when we

consider expectation towards budget the prospective would differ

according to individual or organizational policies and benefits.

Organization like Array Networks will be more focus on-

  • Green

    initiatives as part of the financial report of all listed companies and

    fiscal incentives on Green IT investment

  • IT

    as a enabler for bringing better transparency and lesser corruption

  • Concession

    in duties for technologies that are proven to reduce energy utilization

    & enhance

    security

    of IT systems in government projects

  • Progress

    Report on all delayed government IT projects

  • Providing

    more impetus and extend tax holiday benefit for EoUs and undertakings

    involved in FTZ's/SEZ's for another 2-3 years.



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Finally steady Ensuring policies and regulations needed to sustained

growth rate above 9 percent and promoting IT sector as the key

enabler for transparent systems and clear energy initiatives would do

just fine for the budget.



Jayesh Kotak,
VP-Product Marketing, D-Link India

While 2010 can be

easily termed as the 'year of global revival', 2011 seems more

lucrative and promising. Indian IT sector specifically can expect a

lot of lucrative growth in 2011 with emergence of newer market

opportunities. However, government currently is in a very tight

position as one of the biggest challenges for the Finance Minister

this time around would be to take stringent steps to control

inflation.

It is very likely that the

roadmap for FDI in multi-brand retailing and infrastructure may be

announced in this Union Budget. We also hope to see reduction in

corporate surcharge. This Union Budget may also bring in a lot of

good news for common man, as one can expect income tax exemption

limit to be increased by another 25 percent on existing slab, along

with significant increase in infrastructure bond investment.

Talking specifically about

IT, it is clearly evident that the pace of technology change has

picked up in the last few years. Hence it would be great if

government facilitates the increases in adoption of new technology

like 3G, IPv6 etc. At this point it is important to ensure stability

in duties and levies charged, as any increase would eventually affect

the demand for IT product. One of the big announcements we look

forward to is uniform taxation (or very less difference) policy for

similar product category in different states till GST is in place.

Infact we hope GST will be implemented by April 2012, as it has

already been postponed twice.

Going forward, there is

going to be a very little difference between mobile devices and

computing devices and it is very clear that the devices are

converging. This could lead to different interpretation. It is better

the government recognizes this and takes steps to bring uniform

taxation for these kind of products.

Further, in order to

promote 'green' computing practices, we would like the government to

offer some incentives for users deploying green IT. This step will

create more awareness and definitely encourage users to opt for green

computing devices.

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It is obvious there are a lot of expectations on the card from Union

Budget 2011-12 and we sincerely hope that it further helps

enterprises to have a positive growth environment.”

Samir Dhir, Virtusa

Spokesperson

We expect the

forthcoming budget to focus on reigning in inflation, bring in

measures to continue with reforms to set the stage for sustained

growth and development.


From IT Industry perspective we are

looking forward for extension of tax holiday for STPI/EOU, reducing

the Minimum Alternate Tax rate from 19.93 percent and expediting the

refund of service tax paid. This will help industry stay competitive

in the current environment and would further promote investment in

innovation and new technologies.
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Also

there is expectation on widening of personal tax slabs to take care

of inflation and further provide higher disposable income in hands of

individual.”

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Lavanya Rastogi,
President, OSSCube Solutions

I wish, that this budget

would consider the special challenges of SME segment of the sunrise

sector of IT and ITeS. Consecutive budgets have been kind towards the

IT sector in general, it is an urgent need for the government to take

note of the specific needs of the SME players, which so far have

received a trickle. World over innovation and

disruptive/transformational business models have often come from

startups like Google, Facebook, etc and a nurturing ecosystem has

facilitated their transformation into mega corporations. Its about

time that India caught up.

My wish list form the

government at this stage is for simple things, on the policy side,

dropping the suspense and extension of the STPI scheme by at least

three years to allow the SME's leverage the growth emanating from

global recovery, reduction of rate of MAT, a formal push to the banks

to expand credit under the SME Credit Guarantee scheme, which is

currently tough to get by most entrepreneurs.

On the incentive side, it

would be good to see some bold visionary steps like tax credits for

not only R&D, but also skill development spend, encouragement to

local governance arms specially in backward regions like North, East

etc to engage SMEs in e-gov and capability building initiatives to

help spur growth and maturity in the local IT services sector and

recognizing IT/ITeS as a distinct industry exempt from archaic

provisions of shops and establishments act and other state industrial

acts more oriented to manufacturing industries.

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Atul Hemani, MD and
CEO, Omnitech InfoSolutions

  • There should be an
    extension of at least one year or STPI benefit.

  • SEZ formalities to be

    streamlined and one window clearance to be made absolutely effective

  • Government and state

    development corporations to take larger initiative in building SEZ

    public parks

  • Promote

    entrepreneurship by creating the promotional bodies (Public — Private

    relationship, in relation with universities) with incubation, R&D

    incentives

  • Provide efficient and

    effective infrastructure both physical infra as well as electronic

    infra (datacenters, cloud infrastructure and so on) by public — private

    relationships

  • Streamlining single

    taxation system (GST), merging VAT, service tax, works contract and so

    on

  • Single window and

    transparent systems for establishing branches, units and so on

  • Single, seamless

    taxation and processes across the states throughout India, it seems as

    if they are different countries

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Saurabh Mukherjea, Head
of Equities, Ambit Capital

Given the structural
nature of inflation in India arising from supply side constraints and

India's high fiscal deficit, given the political calculus in the

run-up to State elections and the current state of the Indian

economy, we expect the Union Budget to implement a selective fiscal

stimulus withdrawal whilst focusing on appeasing selected vote banks.

This will mean a greater subsidy bill and a further allocation to

rural India.

The three key challenges

facing the Union Government:

As the current coalition

Government prepares its third Union Budget, three key challenges will

mould the budget's strategy for FY '12: (1) Checking inflation and

enhancing agricultural productivity; (2) Lifting supply-side

constraints to economic growth; and (3) Executing the long overdue

fiscal correction.

Our expectations from the

budget:

Given the above mentioned

challenges that confront the ruling coalition, given the political

calculus and the state of the Indian economy, following is the

articulation of what we expect from the Union Budget FY '12.

Fiscal deficit-poor

quality of fiscal consolidation in FY '12 to follow

The upward revision of

nominal GDP numbers for FY '11 (14 percent increase over budget

estimates) along with the realization of windfall revenue gains on

account of 3G auctions (Rs 0.7 tn more than budgeted) will result in

the Central Government issuing a tighter revised estimate of the

fiscal deficit (as a percentage of GDP) for FY11 — lower than the

budgeted 5.5 percent of GDP.

The Medium Term Fiscal

Policy Statement (MTFPS) projects a 4.8 percent of GDP fiscal deficit

for FY '12 and from a sentiment point of view, the Government of

India (GoI) is expected to declare the same (or marginally higher

number) for FY '12 by compromising on the quality of fiscal

consolidation.

Receipts side:


The GoI

will look to selectively roll back the fiscal stimulus administered

in FY '09 by increasing indirect tax rates for select articles. Given

the abysmal headway on tax reform, the GoI is likely to implement a

damage control strategy through the token implementation of the

Direct Tax Code (DTC) whilst offering the promise of the Goods &

Services Tax (GST) (yet again) next year. Disinvestment is likely to

be a key lever that the GoI will use to make ends meet in FY '12 in

the absence of the 3G auction receipts support.

Expenditure side:


Rural

India and subsidies will be the two key expenditure thrust areas of

the Union Government in FY '12 given the forthcoming State Elections

in 1HFY '12. As suggested by our meetings in New Delhi last month,

the Congress-led coalition at the Center is likely to seek to boost

its popularity ratings (on account of high domestic inflation and

corruption charges) by playing the populist card as political

strategists take center stage whilst reformers take a back-seat (for

now at least).

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MP Vijay Kumar-CFO,
Sify Technologies

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I hope there will be an enhanced focus on

e-governance initiatives through higher fund allocation and

acceleration of deployment efforts. Through the budget, the

government should reiterate its commitment to DTC, GST and companies

bill. With reference to the broadband industry, the government should

remove service tax on consumer broadband for the next five years.

This will significantly increase the penetration of household

broadband connections and this in turn positively impact the economic

growth of the country. Of course the issues of transparency,

corruption and inflation are overarching. Controlling food prices

should be a priority; the government should increase its focus on

agriculture by granting incentives to encourage cost-effective

production and higher acreage of agricultural land.”

Arup Roy, Principal

Research Analyst, Gartner

Critical success factor in

the overall growth and development of Indian ICT industry would

depend a lot on government's focus and investments thereof in the

development and upliftment of:

  • Infrastructure:

    Hassle-free infrastructure to enable smooth business operation, hence

    would expect investments in development of world-class infrastructure

    such as roads, power, public transportation within cities, domestic and

    international air connectivity, a robust telecommunications

    infrastructure, and quality real estate. Insufficient infrastructure is

    a major bottleneck in the growth of India's IT industry. Investments in

    the infrastructure and education will give a big boost to the offshore

    IT industry in the long run.

  • Education: Expect

    investments in revamping the educational sector, so that in the longer

    time frame India can produce creative, lateral-thinking graduates

    rather than just task-oriented 'doers'.

  • On-time implementation

    of projects: All plans and project geared towards development, growth,

    upliftment, vastly lose its meaning if it is not implemented on time.

    The entire government and bureaucratic machinery has to radically

    change its ways and means of execution so that 'on-time' implementation

    is achieved. Of course it is the most difficult challenge, but it could

    be achieved if driven from top down with tight checks and balances.

If all these points are

addressed well then it automatically would result in the growth of

FDIs and India-centric business.

In terms of taxes and

other sops (STPI and the debate thereof), I think the Indian IT

industry has developed its own momentum now and can sustain on its

own. In order to boost entrepreneurship, small scale providers

perhaps they should look at 'Tierization' of companies and those

falling in the lowest tier should be the ones to enjoy those tax and

other benefits. As an example, in order to let small providers

participate in the e-governance projects in India, a certainly

percentage of work (say 25 percent) should be reserved for bidding

only by the small providers.

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These are perhaps the best times for India in terms of economic

growth and the government should make every effort to use this

momentum to create further opportunities of growth.



Kamesh Ramamoorthy,
COO, Ramco Systems

  • Single tax code that

    will ensure common tax structure for software and commodities will help

    in substantial savings. This will simplify the tax structure and make

    it easy to interpret for all SOPs for indigenous product companies that

    are investing in R&D in India and creating assets to service the

    global market. This could be in the form of listing them as preferred

    vendors for government and public sector projects subject to them

    matching the required technical and product expertise criteria.

  • Investment allowance

    for certified indigenous product companies which will boost local

    companies to do R&D

  • Strong focus on

    promoting SMEs, as they are the torch bearers of the future economy.

    Initiatives such as bringing back the special subsidies given to SMEs

    for investments in IT will help in faster adoption of IT among the

    SMEs; easy loans, and better interest rates and setting up of finishing

    schools in collaboration with the industry to ensure the talent is

    industry ready.

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Ashank Desai,
Co-Founder, Mastek

  • This year the India
    incorporation is looking forward to an outcome-based budget with focus

    on reducing the fiscal deficit.

  • Today companies in all

    sector, manufacturing, technology, etc are working towards implementing

    innovative ecosystems within their organizations; government need to

    encourage this through right-sized incentives.

  • Investment in

    technology for the government sector needs to see increased attention.

    While the process has been initiated, provisions are slow and the

    sector holds a huge potential.

  • GST has been on the

    agenda for some time now and has immense benefit for both central and

    state levels. Government needs to work closely with states and the move

    towards the implementation stage now. There are currently a lot of

    issues around the service tax, which need to be resolved on an

    immediate basis. Simplification of these and concessions to

    entrepreneurs and start-ups will help provide fuel for growth of Indian

    industry scenario. At the same time, the small and mid-sized companies,

    especially in the IT sector, are looking forward to some new clauses in

    the FBT. In order to encourage and give a boost to this sector

    government should also focus on meeting their needs in this area.

  • On the long term

    outlook, government should focus on improving the literacy rate in

    India. The sector needs a large amount of funds to be allocated towards

    its development as the current one percent is extremely low.

  • Apart from education,

    infrastructure should be another main area for development. Government

    needs to bring about ways to accelerate the growth of the sector

    through measures, such as incentives on faster project completion.

  • Lastly, while there are

    multiple issues to be addressed, government should prioritize the needs

    of the different sectors and draft a structured plan to ensure

    simultaneous yet balanced growth

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Hanuman Tripathi,
Founder, Infrasoft Technologies

  • There is an ongoing
    controversy of taxation on packaged software solution in India

    regarding a component of VAT, which is applicable for license sale and

    a component of service tax, that is applicable on implementation and

    support services of packaged software. There is also confusion with

    regards to government wanting to apply excise duty on domestically

    produced software and custom duty on imported software. We also keep

    getting inquiries from local Octroi authorities, besides getting

    demands from Octroi department stating that software is a 'GOOD' and it

    has to be charged with Octroi.

  • All this is harassment

    of the IT industry, which has contributed significantly to the

    country's growth and fame in the last 10 years. This must be sorted as

    an important tax regime very quickly. A standardized GST on these items

    will resolve all the problems. The Central Government should give clear

    directives to Excise Department and State Government on not creating

    their own interpretation of what is software and what are finished

    goods.

  • Space in STP/SEZs

    should be made available at discounted rates, to mid-size/mid-cap

    companies, who do not have a software factory in a STP/SEZ. This will

    create large delivery capacity at lower real estate costs. Rapidly

    rising real estate costs in all large Indian cities threatens to become

    a deterrent in India's software industry competitive advantage soon.

  • Government should give

    some kind of export incentives for mid-sized and small companies.

  • Government should also

    incentivize people working in financial inclusion space, as they are

    going to contribute to the vertical growth in a very big way in areas

    of removal of poverty and illiteracy from the face of the country and

    help in creating a transparent census.

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Motilal Oswal, CMD,
Motilal Oswal Financial Services

There is a very strong
possibility that the Union Budget could be a game changer, as far as

the direction of the stock markets is concerned. The market has a

very strong inertia on the downside right now. If there is one event

that can change that, it would be the Union Budget.

Expectations are quite

low. There is only one expectation that I have. Balance the budget in

such a way that the given fiscal deficit target of 4.8 percent of GDP

is met. This would require increasing revenues and curtailing

expenses, as 3G spectrum revenues are not there this year and which

was there last year. Increasing revenues would require complete

winding down of stimulus and having a roadmap for GST. Reducing

expenses would require rationalization of subsidies on food,

fertilizer and oil

Where will be the Sensex

and Nifty by the end of this fiscal?

In all probability, the

developed markets would disappoint on growth parameters in the second

half of the current calendar year, when the effects of QE2 are no

longer there. That coupled with China slowing, would put a downward

pressure on commodities. India is a price taker of commodities rather

than a price setter. Earnings upgrades, if at all, would start once

raw material pressure eases. Foreign flows would start looking at

emerging markets because of better growth and markets should see

higher levels.

I would believe markets

should see levels of 21000 and above by March'2012

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Jaswinder Ahuja,
Corporate VP and MD, Cadence Design Systems

In the 2011-2012
fiscal year, the Indian economy will have to walk a tight rope

between crossing the 'double digit growth barrier' and curbing

inflation. Increased financing of infrastructure development projects

should encourage inclusive growth and reduce pressure on the Metros.

In this regard, technology can help ensure that measures undertaken

to move India forward are not limited to urban centers alone, but

percolate to all corners of the country.

Critical issues, relating

to semiconductor and electronics industry that need to be addressed

by the Union Budget, center around steps to encourage domestic

electronic manufacturing which is yet to take off in the country.

Extension of tax exemptions, funding of R&D grants, amendments to

tax and duty structures, reservations in government tenders for

locally developed intellectual property along with promise of a clear

and concise integrated goods and service tax policy are some of the

core announcements that are being keenly awaited.

Amendments

in

direct taxation policies with regard to ESOPs will be much

appreciated by employees. ESOPs should be taxed as capital gains at

the time the gains are actually realized. The government should also

take necessary steps to notify the safe harbor rules for transfer

pricing.”

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Naresh Wadhwa,
President and Country Manager, Cisco, India and SAARC

style="font-weight: normal;">The
budget should include a strategy for inclusive growth through

measures that promote rural development and all round growth for

segments of the community that can get marginalized while others are

developing fast. For India to sustain its GDP at current level,

government initiatives need to focus on grass-root level development,

especially in the fields of healthcare and education.

Technology-based

infrastructure

such as broadband through traditional wired modes, or

leap-frog to wireless modes, would also ensure that inclusive growth

involves every corner of the nation, and is not limited to urban

India alone. Such investments in technology, whether through

e-Governance, video-based solutions or broadband infrastructure will

prove valuable for both rural education and healthcare initiatives.

In

the education sector, the focus should not only be on providing

access to education, but also on improving the quality. This can be

achieved through adequate budgetary allocation towards technology

that makes distance learning initiatives, including vocational

courses, viable in remote and rural areas. Additionally, government

measures to help increase the pool of 'employable' population will

greatly benefit the IT sector, which is one of the sunrise sectors in

the Indian economy. Similarly, in the healthcare sector, while

investment in building additional primary health centers is

absolutely necessary, the quality and effectiveness of healthcare

infrastructure through the use of technology can be hugely enhanced.

Another

important

aspect of growth is facilitating financial inclusion of

rural populations, to help bring them into the economic mainstream.

While the government's initiatives in areas such as UID will enhance

rural banking penetration, additionally providing incentives to PSU

and private sector banks will also be crucial for reaching out to the

unbanked population.

On

the industry front too, measures from the government to boost demand

for investments in technology and e-governance will be important. In

addition, measures such as simplifying taxation and reducing red-tape

for new projects will significantly bolster industry growth.”

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Sujit Sircar, CFO,
iGATE

Direct Taxation:

  • Extension of tax
    holiday provisions for STPI units:

Recommendation:

Continuance of tax holiday for FY 2011-12, given the fact that, under

the Direct Tax Code to be introduced from April 1, 2012, tax holiday

for STPI units will be withdrawn.

Tax holiday scheme has

helped the small and medium IT exporters, to reinvest the excess cash

and grow their business.

  • Options of transition

    from STPI to SEZ units:

Recommendation: To allow

the STP units to shift to the SEZ scheme and continue to enjoy tax

holiday, under the DTC, without any restrictions.



In terms of the Direct Tax
Code ('DTC') Bill, tax holiday will not be available for the STP

units, with effect from April 1, 2012. The only way in which STP

units can avail of tax holiday under the DTC, would be, to shift to

SEZ. With just an year left for withdrawal of the tax holiday, FM to

introduce provisions which would enable the STP units to transition

to the SEZ scheme and continue to avail tax holiday.

  • Exemption from MAT and

    DDT for SEZ units:

Recommendation: To ensure

that SEZ units continue to get exemption from MAT and DDT, under the

Direct Tax Code. Under the current tax provisions, SEZ units are

exempted from payment of Minimum Alternate Tax ('MAT') and Dividend

Distribution Tax ('DDT'). The DTC bill does not exempt SEZ units from

the payment of MAT and DDT.







  • Litigations for IT
    Industry for 10A/Transfer Pricing provisions:

Recommendation: To provide

clarity with respect to certain terms in 10A provisions such as total

turnover/technical services/onsite services etc. to avoid

litigations, with retrospective effect.

Though section

10A(STPI)/10AA(SEZ) provides 100 percent income-tax holiday, the tax

benefit gets mitigated due to anomalies/non clarity in the

computation provisions and leads to litigations and huge demands

across IT industry. IT industry would expect the FM to address these

issues in the budget, rather than leave them open to interpretations

creating long-drawn litigation and uncertainty.

On the transfer pricing

front, the IT industry has been slapped with very huge demands

because of Transfer Pricing Officers adopting high profit

percentages. IT industry would expect the FM to ensure through an

appropriate statutory amendment, with retrospective effect, tax

holiday is allowed on differential profits as computed by the

department.

Indirect Taxation:

To resolve ambiguities

around taxation of software; blanket exemption of service tax for SEZ

units to be provided as against the existing partial exemption/refund

mechanism. On the indirect tax front, there are tremendous delays in

sanctioning service tax refund claim to exporters, and this impacts

the cash flow. The process needs further simplification. Purchase of

software licenses are doubly taxed, as product under VAT law and also

as a service under service tax law.

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Rohit Mahajan, Founder
and MD, Saviance Technologies

So yet another budget and
therefore yet another set of expectations. Obviously at an individual

level personal tax rates matter the most followed by the corporates,

who would keep an eye on the corporate tax rates and associated tax

rebates or benefits for their respective sectors.

The budget should be

looked upon with a much larger perspective in terms of expected GDP

rate at around eight to nine percent. Governments focus would always

be on regional balanced development, coupled with investment and

expenditure in priority sectors like infrastructure, education,

employment as well as reducing its own expenditure keeping the

various rebates and subsidies in balance.

From an IT company's

perspective belonging to a SME segment, it would wish and expect the

STPI benefits are extended by at least three years, to enable them to

grow and be competitive in the global as well as local markets. IT

sectors growth in India has been exponential in the past two decades

and at present this sector can boast of all magnitude of companies

from matured to start ups, each with different needs and aspirations.

Most of the start-ups and

growing IT/ITeS companies would wish encouragement for their on-shore

and off-shore operations with simpler regulations and compliances.

Similarly within the country itself, just like the proposed GST, such

companies would want the FM to bring uniformity in the state

controlled laws viz- labor laws, which are different for each states.

Complying with each State's laws and regulations severely hamper the

growth and reach of such smaller companies (across all sectors) and

more importantly due to the incremental cost of such compliances,

impacting their margins and in turn discourages them to venture in to

such projects.

Due to growing economy in

our country the compensation packages across almost all the

industries, particularly in the IT/ITeS or similar growth oriented

sectors, have been increasing in the range of 20 percent-40 percent

per annum over a period of three to five years, particularly relevant

to the young population of our country. Therefore the spending

pattern of such population and overall in our country has increased

manifold due to the growing economy directly impacting through

increased compensation packages. There is more cash available with

the taxpaying individuals who normally spend or even over-spend on

retail, entertainment, auto, etc by passing essential savings.

However, over the past few

years there has been very little proportionate increase in promoting

the savings by the respective budgets. Till date an individual can

invest only up to Rs 1 lakh plus a few in designated infra funds to

be locked for a longer period plus a housing interest of up to Rs

1.50 lakh. The budget should increase the tax savings (under 80C

under various instruments viz. LIC, PF/PPF) limit up to at least Rs 3

lakh from the present out dated Rs 1 lakh limits. This will enable a

potential tax savings of incremental Rs 0.67 lakh (assuming a

30percent tax slab) however would pull in a potential incremental of

Rs 1.33 lakh within the savings instruments.

Increasing the tax saving

limits would serve a double purpose. Firstly it will promote tax

savings in specified instruments like LIC, PF, specified bonds,

housing repayments, etc. Secondly due to lesser disposable income in

hand, at a macro-economic level, in the overall economy, it could

help in easing out the inflationary concerns up to a considerable

extent.



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