Budget 2012: What tech companies want?

With the Union Budget 2012-2013 ready to set foot, maintaining the growth and elevating the GDP, alongside controlling fiscal deficit, encouraging inflow of capital and a lot more needs to be taken care of. The technological advancements have played a good meaty role in the development. There are several aspects in the tech world that need some hurling changes. We heard from the tech pros what are their pre-budget expectations for the year. This is what the tech world needs according to these tech geniuses. 


Internet seems to one of the major factors playing a vital role in the growing economy of developing nations. The tech industry seems to be pinning its hopes on a budget focused on improvements for the country’s Internet infrastructure. A boost to the country’s broadband infrastructure and reliable and affordable broadband entering rural and remote areas seems on the wish-list, too.


The telecom factor also played a vital role to improve the GDP, which would further strengthen connectivity and widen the reach of resources in the remotest places in the country. Appropriate funding to extend the telecom infrastructure, tax exemptions for funding and infrastructure capital companies, funding from from Indian Infrastructure Finance Company Limited for telecom, custom duty reduction in raw material used for building telecom products, and further encouragement of telecom rollout in rural areas seem to be on the agenda.

Software and IT industry is also looking for some relief and a good income slab could be very useful. Re-introduction of tax holiday of Software Technology Parks/ Export Oriented Undertakings especially for Small and Medium Enterprises is also in the wish list. Removal of double taxation (Service tax and VAT) on right to use software, maintenance contracts also needs to be addressed, points out a tech pro.

Ramesh A. Vaswani, Executive Vice Chairman, Intex Technologies

Ramesh A. Vaswani, Executive Vice Chairman, Intex Technologies



Last year, the budget had reduced surcharge tax limit on corporate tax to 5 percent from 7.5 percent, which turned out to be quite beneficial. However, the corporate tax is still significantly higher, compared to other developing nations and a further reduction could be effective. The implementation of GST has been unanimously voiced by the tech pros as well, which bring in hordes of benefits, putting an end to double taxation. Talking about the semiconductor industry, government needs to form favorable policies around semiconductor design and relevant attributes, like manufacturing, research and so on, and give a further push to the domestic market.


Here’s what tech pros had to say –

Hemant Joshi, Partner, Deloitte Haskins & Sells feels that Budget 2012-13 should drive the telecom sector to improve the GDP, to create opportunities for financial inclusion, to facilitate the delivery of healthcare, education, banking, governance and to improve the agricultural productivity in all parts of India more particularly in the rural areas. India has urban mobile penetration in excess of 100 percent, while the rural penetration is only 36 percent. The country has more mobile phones than schools, banks and hospitals.


He points out that 10 percent increase in mobile penetration boosts GDP by 1.2 percent in developing countries (GSMA research) and each 10 percentage points of broadband penetration results in 1.38 percent increase in per capita GDP growth in developing nations (source: World Bank). He further says that, “the above research indicates that the quickest way to meet the challenges in healthcare, education, banking, etc. and hence to improve the Indian GDP is through the growth of telecom.


He suggested several reformations, such as restoring tax holiday under section 80IA, tax exemption under section 10(23G) to infrastructure capital companies / funds investing into telecom companies should also be restored, funding from Indian Infrastructure Finance Company Limited (IIFCL) dedicating fiscal, legal and regulatory incentives to indigenous telecom manufacturing, service tax exemption on Internet and broadband services, in order to lower their costs and achieve the government's objective to increase penetration across India.


Naveen Aggarwal, Partner-Tax, KPMG states “IT-ITES sector struggling with increasing costs and global uncertainty, keenly await relief in the forthcoming Budget. Minimum Alternate Tax/ Dividend Distribution Tax exemption was withdrawn for Special Economic Zones (SEZs) units last year.  Re-introduction of these exemptions would be welcoming." He also suggest re-introduction of tax holiday for Software Technology Parks/ Export Oriented Undertakings. 


Provision of affordable devices in coordination with broadband, at the Panchayat level will be the key challenge. A subsidy scheme could be evolved for use of broadband and purchase of device. Increasing the penetration of Desktop PC’s should be addressed through Bank finance under priority lending schemes at low rates of interest. Policies to encourage local manufacture of Electronic Products need to be fine tuned in terms of duty structure and other incentives. Training centres for repair of mobile phones and other electronic devices, focused on male and more particularly, female youth should be set up in Rural areas in PPP mode and tax incentives should be given for such initiatives,” suggests Ramesh A. Vaswani, Executive Vice Chairman, Intex Technologies. 

India has witnessed sophisticated cybercrime cases affecting both enterprises and consumers, it has become increasingly important for us to have an evolved security system in place. Entities such as CERT have been playing a pivotal role in enhancing the security of India's Communications and Information Infrastructure through proactive action and user awareness, we would expect the Union Budget to apportion more grants to ensure secure data access for all Indians,” expresses Jagdish Mahapatra, Managing Director, India and SAARC, McAfee.Jagdish Mahapatra, Managing Director, India and SAARC, McAfee

Jagdish Mahapatra, Managing Director, India and SAARC, McAfee


Another crucial matter that needs to be addressed by the Finance Minister is clearly demarcating the line between treating software as goods or services. Hence relevant taxes can be imposed and companies can comply with the appropriate laws. As the software products industry is largely reliant on the channel ecosystem, the government should consider reduction of TDS for software resellers from the prevailing 10% to 1-2% to align with the corporate tax rate,” Mahapatra adds.

"We are looking forward for some announcements which will give some benefit to Indian software and IT companies in terms of subsidies and tax relief and also some priority to work in state and central work against the international bidders. The biggest challenge today for any IT industry is its manpower and keeping in consideration current income and expense graph of employees if some good income tax slab can be announced it will be a great help for every industry," disclosed Nitin Walia, Director, XgenPlus Technologies.

To encourage and stimulate the domestic industry and promoting locally designed products, there is a need for tax exemptions and R&D grants. Some of the pivotal issues that need to be addressed in the 2012-2013 Union Budget centre around semiconductor design, high-tech manufacturing, encouraging pre-competitive research, and amendments to tax and duty structures. Favorable policies addressing these areas will support the domestic semiconductor industry to compete aggressively in the global market, as well as encourage the growth of the local market. There is need to push forward the much-needed reforms and pending legislations. The Government needs to take urgent steps in the passing of the long overdue Companies Bill. The early implementation of the Direct Taxes Code and the Goods and Services Tax are also important," Jaswinder S Ahuja, Corporate Vice President and MD, Cadence Design Systems.

The surcharge and cess on corporate tax may be abolished. Further, corporate tax rate may be rought down to 25% and tax rate applicable to foreign companies may also be realigned to provide level playing field and to facilitate better tax compliance and bring down cost of doing business in India.Pending introduction of GST, the Budget may reduce the CST rate to1 per cent.With a view to allow industry to keep pace with rapidly improving technology, the deprecation rate on plant & machinery may be enhanced from 15% to 25%,” says Govind Rammurthy- CEO & Managing Director Microworld.

If a good is taxed at an excise of 10% by the Centre and then the State levies a tax of 10%, the tax paid is 21%. However, what GST proposes is having the same rate at Centre and State, charged at the same base. So if both Centre and State are charging tax at 10%, then the tax paid is 20%. No more numerous & inefficient warehouses. The necessity of having a warehouse in each state to avoid CST and paperwork will be eliminated in a GST regime. Savings will come by consolidation of warehouses through avoidance of double handling. The larger warehouses can also have technological sophistication which is not possible for smaller warehouses.However the most important benefit of GST implementation will be the abolishing of various forms and ‘quotas’ at the state entry points. This will save a lot of administrative work and lead times,” points out Rajeev Karwal, CEO & Founder, Milagrow Business & Knowledge Solutions.

Govind Rammurthy- CEO & Managing Director Microworld

Govind Rammurthy- CEO & Managing Director, Microworld



Brian Wong, Vice President, Global Supplier Development, Alibaba.com talks about Internet infrastructure of a country as fast emerging and a strong, critical economic contributor. He also points out reports have shown that the Internet directly contributed to more than $50 billion, or 3.6 percent of Australia’s national GDP, last year (Source: Deloitte Access Economics/The Connected Continent). "We’ve witnessed similar trends in other countries around the world as well. And, as such, we believe that India’s proposed budget should provide reliable and affordable broadband access to rural and remote areas by appropriate combination of optical fibre, wireless and other technologies, to truly connect India to the world.” 


One of the most critical elements for India to reach its export targets is to boost broadband

infrastructure in the country which will enable Indian SMEs to be competitive in the international marketplace. While 3G spectrum has enhanced internet usage, it hasn’t filtered down to the general population. The lack of affordable high-speed Internet service (broadband) in India, particularly in Tier II and Tier III cities, is among the major contributing factors to the lack of widespread adoption of e- commerce by local businesses. We hope that the National IT Policy will help take the Internet to villages of rural India to facilitate access by local business owners to global trade through e-commerce,” adds Brian.


Budgeting for internet connectivity backbone for the country with timelines definition for Metros, B class towns, villages etc, it  would make IT, Entertainment Industry, education reach out to everybody, and work as backbone for lots of industries growth in newer areas,” says Kamal Gulati, Head India Operation, Atempo.

Published Date: Mar 16, 2012 09:17 am | Updated Date: Mar 16, 2012 09:17 am