Budget 2015: Indian IT industry cheers with caution

Several CEOs of India IT companies have welcomed the Union Budget 2015 presented by finance minister Arun Jaitley. They also expressed their displeasure.

Bhaskar Pramanik, chairman, Microsoft India

The Budget 2015 retains the focus on financial inclusion, education, health and agriculture. It has increased focused on infrastructure development, housing and manufacturing in India.

Overall, Budget 2015 is wide in its scope and takes into account the interests of diverse sections of society – middle class, farmers, youth, aged and the disabled. It endorses a vision of India where there is a house for every family with24 hour power, potable water, and all accessible by road, and where at least one member of the family is employed. The FM also talked about building a better social security system for its citizens to provide financial security.

However, we will need to see if some of the other tax related concerns of the IT and ITES sector have been addressed. These include resolving ambiguities in taxation of software products and services. In that context, the service tax rate going up is a concern, because of the impact it could have of driving people to use pirated software. Especially, because of the dual tax on software – the net tax rate for software is above 20 percent.

Alok Ohrie, president and managing director, Dell India

Exemption of SAD, reduction of basic customs duty on electronics components, inputs etc., ease of doing business, encouraging startups and the big boost to healthcare are welcome steps. However, we’ll need to review the notifications before any predictions could be made on the impact on the sector. The economic survey has indicated that a clear political mandate for big bang reforms coupled with a benign external environment can propel India to a double digit growth trajectory.

R Chandrashekhar, president, NASSCOM

Proposal for a Public Procurement Dispute Resolution Bill with a purpose to address contractual disputes related to Government Projects will give a fillip to Industry’s participation in domestic contracts.

Setting-up of initiatives like Self-Employment Talent Utilisation (SETU), a techno-financial and incubation scheme, and the Atal Innovation Mission (AIM) will help promote innovation across the industry. We await the details of the facilitative announcements for start-ups and hope to speedy implementation of the Rs 1,000 crore fund. Clarifications on taxation norms for foreign VCs are also positive.

The other positive developments include domestic transfer pricing applicability threshold has been increased from Rs 5 crore to Rs. 20 crore; central excise and service tax registration in two working days through online submissions including digitally signed invoices will ease business processes and increasing the time limit to claim CENVAT credit from six months to one year aligns it with business cycles; reducing the rate of income tax on royalty and fees for technical services from 25 percent to 10 percent will increase technology adoption in the country through lower costs and authorising CBDT to issue clarifications on the Foreign Tax Credit will help the industry attain global competitiveness.

Anil Valluri, president, NetApp India & SAARC

A number of steps have been announced to improve the ease of doing business; creation of Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs. 20,000 crore, and credit guarantee corpus of Rs. 3,000 crore is a positive step to encourage young, educated, skilled workers who aspire to become first generation entrepreneurs or expand their activities.

Amar Babu, president, MAIT

Budget 2015 is a balanced budget that touches upon many areas of infrastructure, universal social security vision, insurance for all, education among others. From an IT industry perspective, it is a mixed bag with the inverted duty structure being finally addressed with the removal of SAD on all components. The removal of customs duty on components and concessional structure of 2 percent without CENVAT credit are positive steps to encourage tablet manufacturing in India. However it disappoints as no initiatives have been taken to increase PC manufacturing and promote exports. In this budget, we might have missed an opportunity to drive ‘Make in India’ in computers.

BPO and call center

Suresh Senapaty, executive director & chief financial officer, Wipro 

The focus on ease of doing business will spur growth and economic development. The thrust on employment generation in manufacturing is welcome. The Budget has accorded due regard to technology. While the Budget laid stress in adopting information technology for governance in plugging subsidy leakages and in tax administration, it has also supported technology innovation in industry by rationalizing tax on royalty. The commitment to fiscal discipline has been pragmatically balanced with flexibility. This Budget has re-started the much-awaited reforms process. The key consideration now will be the rigor of implementation.

MP Vijay Kumar, chief financial officer, Sify Technologies

Some of good initiatives include abolition of the wealth tax and increase of domestic transfer price from Rs 5 to 20 crore. Additionally, the government’s proposal to decrease corporate tax from 30 percent to 25% and removing the various exemptions which contribute to multiple tax disputes are some good steps in the direction of making tax administration simple.

Increase in service tax is a step towards GST and serves as an indicator of the possible rate of GST which could be a 100 basis points. Creating extensive awareness on social security schemes and making citizens to participate actively is a great initiative. Setting up exchange of trade receivables for MSMEs is remarkable. Monetisation of dormant Gold is another good initiative.

Sudhindra Holla, country manager, Axis Communications India & SAARC 

The budget 2015 addresses the much needed security and infrastructure needs of the country. The focus on security is particularly commendable, with INR 1000 crore being added to the Nirbhaya fund. This shows that the government is taking security and surveillance seriously. The country is at a crucial juncture in terms of security and this announcement is a very welcome one, which will boost trust and well-being among citizens.

To further boost the smart cities campaign, the government has announced funds for infrastructure development. Rs 25,000 crore for the rural infrastructure development and Rs 1,200 crore for DMIC project will steer India towards becoming a smarter country. For the surveillance industry, this will provide a significant market and potential.

Aloke Ghosh, CFO & CS, Blue Star Infotech 

The budget looks at creating new jobs, incentivising self employment and entrepreneurship. It will introduce more competition, innovation and bringing global expertise and technology giving a boost to the Make in India program. Its success is inextricably dependent on creation of skilled workforce. The removal of Special Additional Duty on IT products provides relief and addresses the issue of inverted duty structure.

LC Singh, vice chairman & CEO, Nihilent

Budget 2015 emphasizes on education, pensions, job creation, infrastructure and creating an entrepreneurial culture in the IT sector. The GST will put in place indirect tax system by next financial year while also bringing greater transparency and tax inflows. The other good news is the decision to reduce corporate tax over next four years. These are crucial moves to improve ease of doing business and we welcome them. The threshold for transfer pricing has been increased to Rs.20 crore. If this is coupled with simpler and clearer overall transfer pricing, investment will receive a boost and increase investor confidence. If the definitions of royalty are aligned with international practices, the country’s software sector will be at par with the global norms and standards.

Amitabh Vira, CEO & founder, NetProphets Cyberworks

The advent of GST will not only be a short term tool for the government to work on the fiscal deficit but also create a more competitive services sector in the long run. The Indian IT/ITeS industry welcomes this move. This move will also come as a boon to the growing ecommerce sector, since it has been struggling with taxation issues for a while now.

Shirish Deodhar, co-founder & CEO, Sapience Analytics

The start-up fund, a simpler regulatory environment and ease of doing business, provide the seeds and environment that can lead to a large number of successful companies. Job growth is inevitable in a fast growing economy.

Safir Adeni, president – TiE (The Indus Entrepreneurs) Hyderabad

It is encouraging that the Budget has laid emphasis on job creators by promoting entrepreneurship. However, so far there were talks of Rs 10,000 allocation for startups so we don’t have a clarity whether in this budget the allocation of Rs 1000 crore under Self Employment and Talent Utilization (SETU) for the startups is in addition to the same or it is Rs 1000 crore only now.

BVR Mohan Reddy, executive chairman Cyient and vice chairman NASSCOM

Increase in service tax rate by 1.5 percent is disappointing. With mounting backlog in service tax refunds, the Industry will be impacted. Angel tax continues – Fair market valuation applicable to angel investments and capital receipts taxed in start-ups. This problem is unaddressed in spite of the focus on entrepreneurship and start-ups. Duality in service tax and sales tax applicability to product companies not addressed.

Suman Reddy, managing director of Pegasystems India

The budget has given the right direction to the economy going forward, the Rs 150 crore corpus on making India world class IT hub will bring in a positive sentiment. Focus on Infrastructure, skill development and Manufacturing will enhance economic growth in the long term. Public expenditure in terms of investment in Infrastructure has also increased.

Ramesh Loganathan, vice president and managing director Progress Software

While the details are unclear, the Rs 150 crore IT hub will hopefully encourage development of new technology and products. The Rs 1,000 crore startup corpus, given the wording seems like will help setup and grow incubators and startup seeding.

Toshendra Sharma, founder & CEO, Wegilant 

This is certainly a move in the right direction for fostering a sound startup ecosystem in our country. Any assistance from the Government would be a shot in the arm for startups & small businesses. With support towards the self-employment, being a start-up we comprehend the importance of any kind of support and when it comes from our country’s government, we truly wish to deliver the best for the country and make a difference at large! –

Rodney Noonoo, CFO, Xerox India

The Union Budget 2015-16 is a positive budget and step in the right direction. I appreciate the fiscal discipline and intent to reduce the fiscal deficit that stood at 4.5 percent of GDP in 2013-14 to 4.1 percent for the financial year 2014-2015 and subsequently reduce it to 3.6 percent in 2015-16 and to 3 percent in 2016-17.  Overall I see a spirit of enablement, long term growth with announcements of multiple schemes aimed at bringing a change in the economic and social ecosystem that includes job creation, skill development, bridging the social divide etc.

Partha Iyengar, country manager (Research) – India, Gartner

In terms of the IT industry specifically there is a nod for the needs of the IT industry in terms of making a statement that the needs of the IT industry will be addressed in terms of ease of doing business, capital access etc. However, without reviewing the details of exactly how this is to be done, we will need to adopt a wait and watch approach to see how effective it will be.

Sanjay Rohatgi, vice president, India, Symantec

Technology is going to be a critical enabler whether it is for making GST operational; direct benefit transfers and cashless transactions; e-Biz portal or enabling booking of unreserved railway ticket through mobile phones for the masses. However, to ensure wider adoption of technology, it must be safe and secure to foster end-to-end trust.

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