Budget reactions
A Status Quo Budget? With no dramatic changes, the Union Budget 2012-13 sticks to its old and trustworthy rules to ensure an inclusive growth, which the industry embraces with both a happy and heavy heart COMPILED BY AKANKSHA PRASAD akankshap@cybermedia.co.in
At the Union Budget 2012-13, a slew of announcements were made, which were welcomed by the industry, but with a pinch of salt. From the long-term growth perspective, the industry has appreciated the move towards investments in infrastructure, employment skill development, and electronic industry, however the budget failed to touch the IT industry in particular. We bring forth some reactions of industry leaders.
“For the IT industry, the request to exempt SEZ income from MAT has not been granted and this is disappointing. The focus on R&D is good as the weighted deduction of 200% for R&D expenditure in an in-house facility has been extended beyond March 31, 2012 for a further period of 5 years. There is no date or schedule for the implementation of Direct Tax Code and GST. However the APA will be useful to ease transfer pricing litigation”—N Chandrasekaran, CEO & MD, Tata Consultancy Services
“Overall, the budget has no big bang reforms or changes but maintains the status quo, which provides some hope to sail through the difficult year. The move towards a ‘Medium-term Expenditure Framework’ statement will set forth a 3-year rolling target for expenditure indicators is a very good sign. It is, however, disappointing to see that no clear timeline has been specified for implementing some of the big ticket reforms like GST, DTC, and FDI on multi-brand retail. Hopefully, the government will provide the necessary clarity through administrative circulars to bring in greater certainty on tax position for the industry”—V Balakrishnan, CFO, Infosys
“For the industry, which has been looking for a greater clarity in transfer pricing, the move by the Finance Minister to implement the Advance Pricing Agreement (APA) is recognition of the importance of cross-border trade in a globalized economy and would usher in greater tax certainty for foreign investors in the coming years. However the ‘retrospective amendments’ made are poised to introduce significant uncertainty and increase the cost of doing business in India”—R Chandrasekaran, group chief executive, technology & operations, Cognizant
“While many systemic elements have been set right in the 2012-13 Union Budget, however the telecom industry continues to face numerous challenges. Increase in service tax from 10% to 12% would increase cost of ownership of a mobile phone. This becomes all the more significant for CDMA based mobile services. From the global perspective, the telecom industry in India continues to attract the highest tax rate of 23%. It would have been good, if this could have been rationalized. Given this overall context, if the Indian telecom industry is declared as an infrastructure industry that too would immensely benefit the entire ecosystem”—Vsevolod Rozanov, president and CEO, MTS India 20 | April 15, 2012
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“On the industry front, setting up a `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 rollout is on track for August this year”—Naresh Wadhwa, president and country manager, Cisco India & Saarc
“The increased outlays on education with an emphasis on skilling the youth are necessary steps to leverage the demographic divide in the future and tap the emerging opportunities in the areas of IT such as cloud computing and big data. The decision to increase investment in Aadhaar and leverage technology more in larger service delivery initiatives will also provide impetus to the domestic IT sector”—Rajesh Janey, president, EMC India & Saarc
“The National Manufacturing Policy announced with the objective of raising, within a decade, the share of manufacturing in GDP to 25% and creating 10 crore jobs is a welcome move as this will have a large impact on the ESDM industry. Announcement around Transfer Pricing (TP) would provide an opportunity to resolve potential transfer pricing issues in a spirit of mutual agreement and cooperation rather than the adversarial litigation environment”— Guruswamy Ganesh, VP and country manager, Freescale Semiconductor India
“The proposed full exemption on mobile phone parts may further make the smartphone affordable to a 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, MD, Research In Motion India
“Introduction of a mobile based fertilizer management system has been designed to provide an end-to-end information on movement of fertilizers and subsidies and nationwide rollout during 2012. A central ‘Know Your Customer’ depository to be developed in 2012-13 to avoid multiplicity of registration and data upkeep” —Jagdish Mahapatra, MD, McAfee India and Saarc
“There is nothing exciting or new in the budget for the IT-enabled industry. Increase of 2% in service tax and excise duty is bound to affect MSME industry adversely. This will put further pressure on an 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 the government does not slip on this new date like the earlier promises”—Vikas Khanvelkar, MD, DesignTech Systems
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April 15, 2012 | 21
Budget reactions
“The benefits announced for the 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
“India’s economic growth was marred last year with slower recovery due to deceleration in industrial growth as well as external factors like the European debt crisis and political turmoil in the Middle East. In terms of tax reforms, the proposals for 2012-13 mark progress in the direction of movement towards DTC and GST which will bring about uniformity in taxation. The cascading effect of dividend distribution tax has been removed; benefiting Indian MNCs with operations in other parts of the world”—Minakshi Batra, director India, IDA Ireland
“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 Goods and Service Tax (GST) to replace the existing indirect tax framework, which should be implemented on a fast track mode”—VR Ferose, MD, SAP Labs India
“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% to 12% will cause further burden. Delay in GST implementation is merely increasing problems”—Hanuman Tripathi, group MD, Infrasoft Technologies
“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”—Ashish Hemrajani, founder and CEO, Bigtree entertainment’s BookMyShow.com
“While the Finance Minister 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. With the manufacturing sector facing deficit in skilled manpower, the FM’s proposal to provide weighted deduction for expenditure on skill development will help bridge some gap”—Dinesh Agarwal, founder & CEO, IndiaMART.com
22 | April 15, 2012
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