Budget 2012: A Mixed Bag For IT

IT Biz Focus,

Software body Nasscom expressed its disappointment over the Union budget 2012-13 and so did many veterans, associations and companies in the information technology sector – both large entities and SMEs. Certain segments in IT on the other hand applauded some of the initiatives of the FM. On the whole, one can say budget 2012 is a ‘mixed bag’ for the IT sector. ITBizFocus.com highlights some of the reactions from the industry.

NASSCOM: Budget 2012 is disappointing on various counts – there is no focus on putting the economy on a high growth trajectory; fiscal deficit reduction is through higher taxation, rather than expenditure management; there is no roadmap on implementation of DTC and GST; and also issues of tax simplification, litigation have not been addressed. The continuing uncertain business environment will be negative for investment and hence for growth as well. Equally important, given the current account deficit, there is need to provide a strategic thrust on high value exports; this aspect has been totally ignored. While the focus on infrastructure through various schemes is positive, the increase in indirect taxes both service tax and excise is a setback.

Sabyasachi Patra, Executive Director, MAIT: MAIT welcomes the allocation of 1000 crores for National Skill Devleopment Fund as that will help in bridging the gap in skills. Setting up a Credit Guarantee Fund to improve flow of institutional credit for skill development will also be a good move as it will help in acquiring specific skills by individuals.
Partha Iyengar, Regional Research Director, Gartner India: There is nothing specific to the information technology sector that is either a strong negative or positive. In fact, in the Budget speech, there was no mention of the words ‘software’ or ‘information technology,’ a sign of the lesser importance to the sector. Except for references to Aadhaar and e-governance, there was nothing worth mentioning about for the sector.

Internet and Mobile Association of India (IAMAI): The budget brought to the forefront the power of ICT in enabling livelihood, good governance, transparency and proper targeting of entitlements. Project Aadhar now supports payments for MNREGA, widow pensions and other schemes. The announcement that it will now be mandatory for companies to issue IPOs above Rs 10 Crore electronically and 10 per cent of IPO to be subscribed electronically, is a positive step, and highlights the role of IT in ushering transparency.

P.V.G. Menon, President of India Semiconductor Association (ISA): we would have liked to see some initiatives being announced for the promotion of the domestic Electronics Design and Manufacturing (ESDM) industry. We are also looking forward to the final policy as well as implementation details of the new National Electronics Policy as well as the National Telecom Policy, as related to ESDM sector.

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.

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.

Deepak Chandnani, CEO, Obopay: It is encouraging to see that the budget is focused heavily on the rural development. Clearly, financial inclusion is high priority for the government. Financial Minister’s proposal to complete Aadhar in 50 districts over the next 6 months will lead to availability of financial services to more people. Penetration of banks and financial services in rural India, presents larger scope for mobile banking and payment service providers. We believe that this is a positive sign for Obopay as the budget will only encourage the adoption of mobile banking technologies.

Sunil Chandna, CEO, Stellar Data Recovery: There is nothing to cheer for small and medium-sized companies. Neither is there any consideration on Tax Exemption on software exports nor is there any change in the Corporate Income tax. Increased excise duty and service tax would inflate the infrastructure and operational costs. Instead of bringing in a stimulus, it would make Indian IT companies less competitive globally. To sum up the budget was big letdown.