Sops offer no respite for channel

The Union Government's announcement of two percent reduction in the excise
duty and a further 2.5 percent reduction in service tax has received mixed
reaction from the IT industry. While vendors have welcomed the change and
considered it a positive step, channel partners are of the view that the
announcement would have minimal impact on their business. Partners also
mentioned that the reduction in service tax would offer direct benefit to
customers as the above charges were levied on them.

Sharing his view on the tax reduction, Saket Kapur of New Delhi-based Green
Vision, mentioned, “Since the IT industry is heavily dependent on exports and
with the rupee at an all time low of Rs 50.80 currently, it is not yet time to
rejoice. This move by the government will not really help the IT industry It is
more important that the dollar rate stabilizes.”

Anil Sachdeva of Kadam Marketing, New Delhi added, “The impact of the
reduction in excise duty and service tax is going to be very minimal on our
business. With the dollar rates appreciating and the kind of slowdown that we
have been experiencing the effect has already been negated.”

R Mahesh, CEO of Ozone Computers, Chennai mentioned that the move was only an
attempt by the government to bring a unique tax formula in place. “Reduction is
something that the government keeps doing on a regular basis. What we really
want from the government is clarity on double taxation.”

On the other hand, Umang Mehta of Roop Technology, Mumbai opined that it was
a positive step for end customers as service tax was being billed to the end
customer. “The reduction would benefit end customers for sure. However,
reduction in excise duty will have a minimal impact on the IT industry since
depreciation in rupee will not put pressure on the cost of the IT hardware.
Vendors will not be reducing the prices of products as the dollar is already at
an all time high,” opined Mehta.

Disti Stance

Distributors however, are in a wait and watch mode, when asked about the
effects of the reductions on the IT industry. PS Neogi, Director Redington
stated, “Any step which helps in bringing down the total cost of any product or
service, generally contributes to demand generation and business growth.
However, we have to wait and watch, with specific reference to our industry, as
to how much these reductions would help in uplifting the 'mood' of the
consumers, which is vital for him to start spending again.”

He further added that these measures have to first bring about an overall
improvement in the economic and industrial scenario for consumers to regain
confidence and start buying 'products' and 'services' more freely, once again.

Sanjeev Krishen, Chairman, Iris Computers opined, “I don't really feel that
the move will help the IT industry to a large extent. On hardware items there is
very little applicability of service tax and its a welcome move for those
partners who are into the business of offering services. Besides reduction in
excise duty will help those who are into the business of manufacturing locally.”

For K Jai Shankar, MD, Ingram Micro, the reduction in tax is a very positive
development. “Products which attracted excise duty/CVD of 10 percent will be
cheaper,” said Shankar.