Budget 2008 did not turn out to be that eventful for the IT industry as expected by a large majority. Sops did not come directly but the finance minister has touched the industry through tangents and indirect touchpoints.

This years Budget has a proposal to enhance the allocation to the department of information technology (DoIT) from Rs 1,500 crore in 2007-08 to Rs 1,680 crore in 2008-09. However, the much-awaited extension of STPI tax holiday announcement was conspicuous by its absence.

Reduction in Excise Duties
For the hardware industry, excise duties on many IT components were reduced. Tax has been exempted on set-top boxes. Specified parts of set-top boxes, namely SMPS power board and IR module, for use in manufacturing set-top boxes, have been exempted from customs duty.

Concessional rate of 5% customs duty was earlier provided on MP3 players or MPEG 4 players. Now, all MP3/MP4 or MPEG 4 players, with or without radio/video reception facility, will attract 5% customs duty.Specified inputs and raw materials for manufacturing specified electronics/IT hardware items have been exempted subject to specified conditions.

There were no changes wanted on a broader tax structure. We are glad with the approach on customs duty. The excise duty continues to be 12%. There have been small sops on data cards with no countervailing duty. Overall, this is a good and stable Budget for the hardware industry and infuses confidence and stability, says Vinnie Mehta of MAIT.

Also, excise duty has been reduced from 16% to nil on wireless data cards. Countervailing duty on wireless data modem cards with PCMCIA/USB/PCI express ports has been exempted by way of excise duty exemption. These goods are already exempt from customs duty. However, 4% additional duty of customs will be attracted.

Internet Penetration
In view of augmenting Internet penetration, 100,000 broadband Internet-enabled common service centers (CSCs) in rural areas, PDS, smart cards pilot project, Rs 75 cr for common service centers, Rs 450 cr for state wide area networks (SWAN) projects in various states, and allocation of Rs 275 cr for state data centers are key points of emphasis.

While there is expectation for the wireless industry to get a boost from these proposals and the excitement is being expressed, Muthu Logan, CEO, Brovis Wireless Networks, adds that relief on excise duties was announced last year too but the same has seen minimal impact. The duty regime is still high when compared to other countries specially with customs duties, he says.

The industry has welcomed the clarification that the software testing service provided remotely through the Internet or any electronic network will be considered as export of service.

From a duty reduction perspective, the IT industry gets affected both directly and indirectly. There has been an explicit intent on bringing customized software at par with packaged software and there has been an increase in excise duty from 8% to 12% on packaged software.

This would lead to an increase in the price of software for both the masses as well as enterprises, as pointed out by Sourabh Kaushal, industry manager, Frost & Sullivan, South Asia and Middle East. In another important policy thrust, there has been an impetus on green and clean technology products.

Starting three new IITs is an indication of the governments priority toward higher education. I hope, in this endeavor, the government will give private sector initiatives in higher education greater leeway and freedom, says Aruna Katara, executive chair, I2IT.

Mixed Reactions
Ask the IT Inc and there are mixed reviews on how the IT sector has been treated in Budget 2008. IT has more or less been given a neutral treatment says, Amar M Karvir, head, Pune Operations, Aztecsoft.

The spotlight has been more on agriculture this time, Rajendran, CMO, Acer India, gives full credit to the finance minister in balancing various competing requirements by making some bold announcements that benefit the important sectors of education, health, and agriculture.

Ashish Dehade, MD, First Advantage, feels that by addressing the fundamental concern of employability and skill gaps that is required of human resources in the 1.1 bn-plus population of India, the finance minister has helped the industry in a big way.

The Rs 1,000 cr to be linked to knowledge institutions and the encouragement to Sarva Shiksha Abhiyan would help the industry on a macro level and eventual basis in a big manner. In fact, in that light, there have been allocations of about Rs 3,440 cr to UGC and Rs 3,205 cr for technical education as per the Central Plan 2008-09, he said.

Pratima Harigunani/CyberMedia News
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