We have summarized the major IT related budgetary provisions announced today, February 28 2013, for India in a separate article
Here we present the industry viewpoint, in no particular order:
Pradeep Nair, MD, India and SAARC Autodesk: The budget was austere in character and as expected stressed on fiscal prudence. What should please us in corporate India is the fact that the FM has laid a lot of importance on two specific areas which are imperative to boost growth- namely infrastructure development and Medium and Small enterprises. In particular, the move to extend MSME benefits for a period of three years post moving to a higher category is welcome. The exemption of 15% in investments of more than 100cr to setup plant and machinery should also provide a huge leg up to the manufacturing sector. Overall, not much that’s spectacular or game changing in the budget, but well balanced.
Partha Iyengar, Country Manager - Research, Gartner India
The big specific positives of the budget are that he has focused both in terms of the letter and spirit of the budget on the key planks of growth for India and health of every industry, including IT, which is Infrastructure, Education, Skills Development, and incentives for the growth of domestic manufacturing. The recognition that the overseas ‘trust deficit’ in terms of a comfort level on India’s investment climate has to be addressed is also welcome.However, the budget is only a directional statement, and the challenge for India historically and even currently is in the execution of the statement of intent outlined in the budget. This has been India’s Achilles’ heel, in that bold pronouncements in the budget never see the light of day or are not implemented as effectively as they can or should be. So it was disappointing to not see any statements on what the government would do to ensure mechanisms/oversight to ensure speedy and efficient implementation of these programs.
Asim Warsi, VP -Samsung Mobile. The 15% investment allowance on manufacturing investment should give a fillip to domestic manufacturing. However, in overall terms, we do not see the Budget reviving the consumer sentiments in the absence of any specific incentives to boost consumer sentiment itself. Further, the increase in the excise duty on mobile phones will not have a positive impact on the mobile industry and should lead to an increase in prices for end consumers.
Dinesh Agarwal, Founder and CEO, IndiaMART.com: The current budget definitely a positive one for the MSME community. By increase the budgetary support for SIDBI (Small Industries Development Bank of India) for Micro Finance Equity Fund by 100 cr, the Finance Minister has ensured that the financing needs of MSMEs are taken into consideration and they are able to growth at an optimum pace.” -
Suresh C Senapaty - Executive Director & Chief Finance Officer, Wipro.
The budget delivers on the promise of fiscal prudence, continues to drive progress on reforms and chalks out initiatives like investment allowance to ensure growth is not ignored. Reforms have progressed in the areas of Direct Tax Code, GST, financial markets regulatory authority for Road sector and Tax Administration Reform Commission to bring about a tax regime, which will be more proactive in closure of issues rather than litigious. Overall, the budget is balanced and realistic.”
T M Ramakrishnan, CEO-Devices, S Mobility Ltd The handsets industry is facing difficult times with increased competition and price wars at large. With the proposed increase in tax for handsets above Rs.2,000, we do not see a decrease in demand but definitely, there will be pressure on the margins. This decision will surely impact the industry’s focus on making smartphones more affordable. At the same time, rural areas might get that much more difficult for smartphones to penetrate.”
Siddharth Nambiar, Co Founder and Managing Director, OfficeYes.com
We are pleased to see an encouragement to MSME by way of the extension of benefits for 3 years for those companies that cross the threshold. This is a core customer constituency for our B2B office supplies e-commerce business and their growth will ensure higher growth for us.The budget has incentivized startups & SMES. Angel investors registered with SEBI will get pass through status. The news on implementation of a uniform Goods and Services Tax (GST) is encouraging. When implemented this will mean that enabling infrastructure such as warehouses, logistics systems etc. will be set up in locations on the basis of pure business efficiency, rather than for tax-related reasons, which should lead eventually to a reduction in costs for customers
N. Chandrasekaran, CEO & MD, Tata Consultancy Services
The FM’s intentions are very clear: to move India back to a higher growth plane. And given his lack of runway, he has taken lots of small measures which together could boost growth. From a technology perspective, allowing funding for technology incubators located within academic institutions to qualify as CSR expenditure as per new Companies Act will give a huge boost to entrepreneurs and start-ups and increase the engagement of the corporate sector and start-ups.On the taxation front, removing double taxation on dividends received from overseas arms will reduce the burden on shareholders. From the perspective of the IT industry, the clarifications on taxation rules regarding development centers and safe harbor rules are very welcome as are measures to drive skill development, with a special focus on Tier II and Tier III towns.
Nidhi Saxena, Founder, Chairman & CEO, Karmic Lifesciences
With this budget India may have missed an opportunity to assert itself in the life sciences domain. Industry expected Government to promote Scientific and Research infrastructure development to give a big thrust to R&D, including Clinical Research. India needs a strong research culture so as to create at least one blockbuster drug for which R&D and Clinical Research activities needed encouragement by way of a long term tax holiday on products developed in-house, extension of weighted deduction on R&D on all research related services, grants and scholarships for translational medicine.
Manav Garg, Founder and CEO, Eka Solutions
Overall it is a positive budget with 17% increase on the education sector from the last budget, liberalization of investment in infrastructure and references to capital market reforms. The decision to treat funds provided by corporates to business incubators located in academic institutes as part of their corporate social responsibility (CSR) is a welcome move which would help young entrepreneurs and strengthen collaboration between industry and academia. The announcement of issuing a circular to provide clarity on taxation matters with regard to research and development activities in the IT sector is also a step in the right direction.
Harit Nagpal, President of the DTH Operators Association of India and MD & CEO, Tata Sky Ltd. The DTH industry is already paying 32 % of its revenue as taxes. At a time like this, when the government’s Digitization mandate is entering its 2nd phase, the industry requirement is many times normal and there is no local manufacturer of repute who can deliver quality boxes in such quantities . Therefore , this increase seems out of place and in all fairness should be reversed.
NASSCOM NASSCOM had represented to the government the imperative of facilitating ease of doing business in India. It is encouraging that the Finance Minister has stated that `doing business in India must be seen as easy, friendly and mutually beneficial’. He has also re-emphasised the need for clarity in tax laws, stable tax regime, non-adversarial tax administration and dispute resolution. His proposal to set up the tax administration reform commission is in the right direction and we hope this will address being faced by the industry wherein interpretation issues are inconsistent with the legislative intent of the policies.The focus on SMEs and start-ups will definitely help to boost entrepreneurship in the country. Angel investing is critical for the country and the recommendations on structuring this through SEBI and providing pass through benefits is a step in the right direction. However, it would be important to amend Section 56 to make this applicable to investments above Rs. 5 crore. NASSCOM will work with the Indian Angel Network and SEBI to take this forward.
Some of the areas of disappointment include:No specific thrust on boosting high value exports. Substantial increase in tax on royalty, however, DTAA offer a cushion. Exclusion of IT sector from the ambit of the investment allowance which has been extended to the investments related to plant and machinery. No mention on service tax related issues both pending and new rules. No clarity on retrospective levies. Levy of a 20% withholding tax on buyback of shares by unlisted companies
Anil Valluri – President, India & SAARC Operations, NetApp
While this year’s budget can be viewed by some as a moderate one, I believe it is a positive one, in view of the economic conditions. It focuses on enabling faster, sustainable and more inclusive growth as well introduced some key reforms for promoting overall economic development. Definitive measures around fiscal consolidation especially the announcement of the GST law and allocations towards CST compensation, are very welcome.
Jaswinder S Ahuja, Corporate Vice President and MD, Cadence Design Systems. We are pleased to note that the budget provides incentives to the semiconductor industry in the form of import duty waivers on plants and machineries for companies looking to set up domestic fabrication units. The provisions of the National Policy on Electronics announced last year and this incentive are the first steps to kickstarting local manufacturing and accelerating the growth of the Indian electronics eco-system.”
J V Ramamurthy, President, MAIT Though the Government has announced the National Manufacturing Policy that aims to increase the share of manufacturing in GDP to 25% within a decade, the budget has failed to reverse the inverted tax structure which has been impacting the industry for years now, making India a predominantly import dependent country.
Amar Babu, Vice-President MAIT: The key positive aspect was that the Government has aimed to enhance the ESDM industry by providing appropriate incentives for semiconductor industry, including zero customs duty on plants and machineries for setting up wafer fabs units in India, but it does fail to correct the inverted tax structure anomaly.”
Navaneet Mishra, VP – Globalisation Services, SAP Labs India.
The Tax Administrative Reform Commission is a good initiative to review tax implications. We truly expect the commission to review the policy content and its implement-ability and provide the feedback to enable businesses run with minimal disruption. Increasing the royalty tax to 25 percent from the existing 10 percent could be a visible concern for Global MNCs, wanting to setup their subsidiary and do business in India.
Sujit Sircar, CFO, iGATE The budget has nothing interesting to look forward to. With the economic climate demanding high-voltage reforms and measures, this budget prefers to stay conservative and indecisive. For the IT industry too, there is nothing to feel happy about. We would have liked to see our wish-list being addressed. However, the FM has chosen to remain calm and keep things unchanged than take any aggressive steps to fuel growth
R. Narayan – Founder & CEO, Power2sme (India’s leading Buying Club for SMEs)
While the Union Budget 2013 is encouraging for the SME industry, it is not aggressive enough. The good part is that the Indian government has reiterated its support to SMEs by announcing special plans that would facilitate the growth of the SME community. The announcement that small and medium companies can now list on the MSME exchange is very positive.
Adi Godrej, President, CII The Budget meets most of our concerns regarding fiscal consolidation, investment incentives, and inclusive growth. These are in alignment with CII’s submissions in its pre-Budget Memorandum to the Finance Ministry.The measures to encourage micro, small and medium enterprises should go a long way in helping these firms to scale up and invest in technology. The three-year extension of non-tax benefits after a unit attains medium size would encourage growth and employment creation.
Praveen Bhadada, Director-Market Expansion, Zinnov It’s good to notice that the government has finally realized the importance of Technology Incubators, and linking this to the CSR budget is a welcome move. We surely foresee this to improve the positioning of India as a start-up nation.It is also good to see government’s focus on Innovation. Setting up a Rs 200 cr. fund for fuelling local innovations is great news that will encourage the Innovation ecosystem in the country. Additionally, the budget also brings in lot of positive initiatives for the important MSME sector with announcements on listing on MSME exchange (without IPO), non-tax benefits and no tax for MSMEs that move to large enterprise class. The grave issues of clarity on tax for R&D & IT companies in India, and lack of specific focus on domestic & exports market for IT companies still remain untouched. Along with increased cost of mobile phones and heavier import duties on Set-Top-Boxes, this has brought in some disappointment to the industry.
Shailesh Haribhakti, Chairman, BDO Consulting Pvt Ltd.
This is the most disappointing Budget as it has no ideas that can give a huge thrust to jobs, CAD reduction or serious fiscal compression. If the math of the Budget is found hard to accept, the signal for inflation muting and consequent rate reduction will be weak. We may continue in an era of postponed commitment to investing.