How IT industry is reacting to Budget 2012-13

InformationWeek,

Professionals in the IT industry are reacting to the Budget 2012-13 saying there are no big reforms or changes in the Budget from an IT sector perspective. Here’s what the IT industry has to say about the Union Budget 2012-13:

Jagdish Mahapatra, Managing Director- India and SAARC, McAfee:
Last year, due to unfavourable global factors, India’s economy was largely affected. This year, the Finance Minister has proposed a fair bill which is for the most part populist in nature. It bodes well for new investors and also creates a wonderful picture in the health, education, NREGA sectors. For the IT industry however, this is a moderately encouraging bill and has made few strides in the development of the sector. Certain benefits we see that will accrue to the industry at large would be:

– Scale and roll-out UID in 50 districts
– Introduction of mobile-based Fertilizer Management System has been designed to provide end to-end information on movement of fertilisers and subsidies. Nation-wide roll out during 2012
– A central “Know Your Customer” depository to be developed in 2012-13 to avoid multiplicity of registration and data upkeep
– DTC and GST Bills

Vikas Khanvelkar, Managing Director, DesignTech Systems:

There is nothing exciting or new in the budget for IT enabled Industry. Increase of 2 percent in service tax and Excise duty is bound to affect MSME industry adversely. This will put further pressure on already sluggish Auto and manufacturing segment and in turn will affect their MSME suppliers adversely. Introduction of GST from August 12 is a welcome indication provided Government does not slip on this new date like the earlier promises.

V R Ferose, Managing Director, SAP Labs India:

Although it was a status quo budget aimed at fiscal consolidation, there were quite a few bright spots for the industry. The Finance Minister re-emphasized the need for GST (Goods and Service Tax) to replace the existing Indirect Tax framework. This would have a far reaching impact on the industry as a whole and hence should be implemented on a fast track mode. It is also good to know that GSTN would be made operational by August 2012. Explicit fund allocation to UID-AADHAAR project is another positive indication and would have far reaching benefits to the social mass of India. The Budget has also brought in certain changes to existing excise and service tax structure. The introduction of New Tax slabs at Direct tax framework lays a foundation for early enablement of DTC (Direct Tax Code) in India.

The budget has focused on resource mobilization through indirect taxes. My initial thought, at this point is that it could lead to inflationary pressures in the economy and work against growth in the manufacturing sector. Besides, the will to take hard policy decisions was missing and this may hurt business confidence just when it is needed the most.

Dinesh Agarwal, Founder & CEO, IndiaMART.com:

While the FM called for speedy reforms today, the Budget did not indicate much in that direction. The key highlight, however, was ‘GST’ which is now expected to be operational by August 2012. We hope that this timeline is met as it would certainly help address the multiple taxation issue faced by the MSMEs currently. We had also expected some effective mentions to simplify taxation and also consolidate multiple departments to allow better compliance by MSMEs. This still remains to be looked at by the government. Another positive for MSMEs in this budget was allocation of Rs 5,000 cr to SIDBI for venture fund which would enhance equity availability to MSMEs. Exemption of capital gains tax from sale of property when proceeds are used for investment in SME would also help augment funds for SMEs to a certain extent.

Ashutosh Prabhudesai, Controller & Director Finance, FUJITSU CONSULTING INDIA:

The Finance Minister has demonstrated the “in-principle” acceptance for moving towards Unified GST by standardizing the tax Rates across the spectrum of Services. The rationalization of tax slabs for non corporate income taxes is also a step towards the implementation of Direct Taxes Code. However the excise duty increases and service tax rate increase would mean higher costs for the Industry. The pill could have been sweetened by a reduction in corporate tax rates which did not happen.

Hanuman Tripathi, Group Managing Director, Infrasoft Technologies Limited:

The Finance Minister has announced no benefits for corporates. With global downturn, IT sector should have been given some benefits so as to boost the segment. The increase of service tax from 10 percent currently to 12 percent will cause further burden. Delay in GST implementation is merely increasing problems. There is a commitment of government to IT enable several sectors like LPG distribution, payments for government schemes and continued investments in Aadhar (UID) which is heartening to note as it will create more projects in domestic IT business. All in all, the relevance of doing Annual Budgeting exercise by putting so much of government focus and expenditure is increasingly getting lost as no substantial landmark changes have come forth in budgets for years now; something that will boost corporate performance or bring prices down in the country.

Lavanya Rastogi, CoFounder, OSSCube:

The budget fails to deliver a clear signal to the industry that Government is serious about “action” in reforms. Yet again “policy pedicure” style effort seems to have been made in support of the manufacturing, banking and agri based industries, even SMEs find a mention with revision limit on compulsory Tax Audit – but the budget sorely lacks of a single game changing move. Knowledge based industries like IT, ITES and even Pharma seems to have been totally given a miss by the FM. Second budget in a row with a flavor of “stale,” it’s bound to cement cynicism amongst the most optimistic entrepreneurs.

Richard D’souza – CEO, Melstar Information Technologies:

The increase in the service tax rate is definitely a mood dampener for the IT industry but it may not have a significant business impact as users of IT services are essentially companies in which such services are being increasingly used in mission critical applications.

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