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Follow UsShankar 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.
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.
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.
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.
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.
lang="en-US">
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.
lang="en-US">
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 investmentIT
as a enabler for bringing better transparency and lesser corruptionConcession
in duties for technologies that are proven to reduce energy utilization
& enhancesecurity
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.
lang="en-US">
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.
lang="en-US">
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.
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.”
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.
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 effectiveGovernment and state
development corporations to take larger initiative in building SEZ
public parksPromote
entrepreneurship by creating the promotional bodies (Public — Private
relationship, in relation with universities) with incubation, R&D
incentivesProvide efficient and
effective infrastructure both physical infra as well as electronic
infra (datacenters, cloud infrastructure and so on) by public — private
relationshipsStreamlining single
taxation system (GST), merging VAT, service tax, works contract and so
onSingle window and
transparent systems for establishing branches, units and so onSingle, seamless
taxation and processes across the states throughout India, it seems as
if they are different countries
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).
MP Vijay Kumar-CFO,
Sify Technologies
“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.
lang="en-US">
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&DStrong 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.
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
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.
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
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.”
Naresh Wadhwa,
President and Country Manager, Cisco, India and SAARC
“
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.”
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.
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.