Budget 2012: Post-budget reactions from the tech industry

After putting forth the expectations of the tech companies from the Union Budget 2012, the budget, itself has invited mixed reactions from all quarters. While some tech pros found it balanced, some found it neutral, while others thought a lot was left out. The telecom sector seems to be the quite disheartened by the new budget. While it was maintained that the telecom sector has been playing a vital role in the growth and development of the nation, and everyone envisaged this growth to rise with reliefs in the sector, which would then accelerate the penetration of mobile phones manufactured in India, given the rollout of 4G, coming later this year, hopefully. The telecom sector has also been granted an infrastructure, which was on the wish-list of many.

On a positive note, mobile phones’ spare parts have received 2 percent exemption from excise duty, leading to lower market prices of phones manufactured in India. While consumers can continue to sit back and chew on that one, the spoiler came in the form of a rising service tax, which would mean pricier mobile bills for the masses. 

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Talking about consumer electronics, which the budget has hit, too by rising costs and depreciation of rupee, seems to have got no relief, either. Consumer electronics could get more costly. However, those wanting to buy LCD, LED TVs can now manage a smile, since the Union Budget 2012 offers full exemption from the Basic Customs Duty (BCD). Another aspect that the tech industry was expecting some reformation on is software. Clearly mentioned in the expectation about not treating software as good, hasn’t been paid any heed. Revisions in the Minimum alternate tax (MAX) has been also given a miss, which could have otherwise created a conducive environment and help attract foreign investment into the country. The Aadhaar tablet-enabled payments for various government schemes in at least 50 districts within next 6 month has been a welcome change, appreciated by many.

Here’s what tech pros had to say post budget 2012 -

Hemant Joshi, Partner, Deloitte Haskin & Sells carefully puts across the positives, indirect benefits and negatives for the telecom industry. The positives, include introduction to viability gap funding for telecom towers, Mobile phone parts have been exempted from custom duty, enhanced budgetary allocation to healthcare / skill development, mobile (non-stationary) training centers and plan to use Aadhar for direct transfer of subsidy to end consumers, while the negative has been the telecom tariffs are likely to go up by 2 percent with increase in service tax. On another positive, government has finally decided to set up the GST network to be implemented probably by August 2012.

Sunil Dutt, Managing Director, Research In Motion India

“The Budget indicates some prudent steps towards fiscal consolidation and reflects that the government is sincere about the fiscal situation going forward. The proposed full exemption on mobile phone part may further make the smartphone affordable to larger section of the masses and basis the direct taxes, the increase in disposal income will further enhance the penetration of smartphones. Introduction of a constitutional amendment for GST is also a positive development,” Sunil Dutt, Managing Director, Research In Motion India.

The Cellular Operators Association of India (COAI), feels that the budget announced does not address critical issues related to the telecom as well as infrastructure sectors of the country. Apart from infrastructure funding provisioned to work through Gap funding and Mobile tracking for fertilizer subsidy, there are no major takeaways for the industry. Contrary to the recommendations put forth by the industry, no tax relief/benefits have been granted to the telecom industry, which keeps reeling under rising operating costs and deteriorating margins. Moreover, the increase in service tax from 10 percent to 12 percent will further affect the growth of the industry as it is detrimental to the objectives of rural penetration and affordable rates for the consumers. 

Mahesh Krishnan, VP-Home Appliances, Samsung India said, “The benefits announced for key sectors like infrastructure, agriculture and education are bound to improve the overall economic scenario. However, the budget does not bring any relief to the consumer electronics industry, which has been reeling under the impact of rising input costs and rupee depreciation in recent times. The rise in excise duty may lead to an increase in prices of consumer electronics products.”

Mahesh Krishnan, VP-Home Appliances, Samsung India

“Online media fraternity were expecting support for growth through reduced online transaction charges, support-system to logistics companies to strengthen PAN India delivery system, internet access to all the villages, so that eventually more and more online shops could be created. But Pranab seems to be not in-line,” says Gaurav Singhal, Co-Founder & CEO, Blue Digital Media.

Ashutosh Prabhudesai, Controller & Director Finance, Fujitsu Consulting India, “The Hon’ble 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.”

Ashutosh Prabhudesai, Controller & Director Finance, Fujitsu Consulting India

Uday Sodhi, CEO, HeadHonchos.com feels the impact of the new budget is slightly positive for IT/ ITes, neutral for telecom and slightly negative for FMCG, Consumer Durables.

“As a foreign corporation with an Indian subsidiary, the government’s plan to introduce tax reforms for the enactment of Direct Tax Code Bill is encouraging for us. The move to set up the GST network as a National Information Utility and operationalize it by August 2012 is also favourable for the industry. The budget has also recognised the role of technology in creating a citizen centric governance framework, reflected in the subsidy provided for Aadhaar tablet enabled payments for various government schemes in atleast 50 districts within next 6 months. This is particularly of interest to us as we at Citrix are helping customers to enable on-demand access to desktops, applications and data on tablets in their workplace which results in increased productivity,” feels Sanjay Deshmukh, Area Vice President – India Subcontinent, Citrix Systems. 
 
“Over all, the government realises the role that mobile devices have to play in enhancing and streamlining IT oriented citizen centric governance framework. This is reflected by two provisions in the government 1) creation of a mobile-based fertilizer management system that will provide end to-end information on movement of fertilisers and subsidies.  2) roll out Aadhaar tablet enabled payments for various government schemes in at least 50 districts within next 6 month,” expresses CEO & Co-Founder, Vserv.mobi, Dippak Khurana.

Sridhar Sarathy, Vice President – India operations, Juniper Networks reveals,“With the proposal to extend the weighted deduction of 200 per cent for R&D expenditure in an in-house facility for five more years, the Union Budget FY 2012-13 is a positive promotion of the long-term importance of science, technology, research and innovation in India. This will be of benefit to organizations conducting research and development in India and will help to encourage them to deepen their connections with the ecosystem and the talent available in the country. The Finance Minister’s recognition that “the driving force of a modern nation is research and the creation of new knowledge” is to be applauded.”

Rohit Chaudhary,Co-Founder & CEO, eTechies.in.

“We continue to believe that with less than 10% PC penetration and fewer than 5% Internet Penetration, the Indian economy is virtually knocking on the tip of the iceberg, lest we are not left merely hanging on that tip. The Budget 2012 should have set clear milestones detailed-out to make every single village and town/city connected via Internet/Broadband, within the proposed budget period itself,” Rohit Chaudhary,Co-Founder & CEO, eTechies.in.

“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 which would have a far reaching impact on the industry as a whole and hence should be implemented on a fast track mode,” V R Ferose, Managing Director, SAP Labs India.

Naresh Wadhwa, President and Country Manager, Cisco India & SAARC said, “Scaling up of the Aadhar project as well as enabling it to support PDS will greatly benefit the common man. The budget lays considerable focus on infrastructure and rural development. The increased infrastructure spending at Rs 50 lakh crore, Rs 10,000 crore allocated to NABARD for refinancing regional rural banks and the plan to set up ultra small branches under the ‘Swabhiman’ campaign is encouraging. On the industry front, setting up Rs 5,000 crore venture fund for MSME sector is a welcome move, given that SMEs employ a sizeable population. We are also hoping that the GST roll out is on track for August this year.”

Ashish Hemrajani, Founder and CEO, Bigtree entertainment Pvt. Ltd’s BookMyShow.com said “The service tax exemption on the entertainment industry is a very encouraging step. It would propel the industry towards bigger and better things. This move can also be viewed as a way to offer some respite to the previously challenging situation the industry faced due to heavy taxation.”

Sunil Chandna, CEO, Stellar Data Recovery, “There is nothing to cheer for small & medium sized companies. Neither there is any consideration on Tax Exemption on software exports nor their is 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 lndian IT companies less competitive Globally.  To sum up The budget was BIG let down.”

Sunil Chandna, CEO, Stellar Data Recovery

Dr.Ganesh Natarajan, President & CEO of Zensar Technologies, “Nothing much in the budget for IT and not enough focus on incentives for skill building or Tier 3 cities :The announced advance pricing agreement may help transfer pricing decisions and the USD 1 bn vc fund focused on msme is good for entrepreneurship.”

Main Image Credit: Getty Images