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Tax Reduction Tops Budget Expectations List
February, 26th 2010

Well, it's that time of the year again, as we sit biting our nails waiting for the Finance Minister to read out his proposals. After a period of turmoil, the industry has expectations. There is a need for stability, and policies that will safeguard the investments especially of the SMBs. Tax concession has always been a main agenda for the industry.

Here are more views from Industry talking on the expectations


Puneet Datta, Assistant Director - Marketing, Canon BIS:
2009 was a good year for Canon despite uncertainties faced by many sectors in the industry. However we expect 2010 to continue to be very strong in terms of performance as far as the consumer electronics industry is concerned. The industry expects a reduction of 30% in the corporate tax due to the introduction of Direct Tax Code (DTC) suggesting a 25% rate.

We also hope that the tax concessions received by us last year continues to stay through the new year as this will give us the added boost to achieve the growth rates projected before the slowdown hit the economy. Apart from the above we foresee the government strengthening its focus on the rural sector with greater fiscal incentives, rural employment and various other rural incentive programs. These steps would surely go a long way in giving the rural economy and rural demand a greater boost.

We expect that policies of the government should be such that they result in higher disposable incomes in the hands of customers so that they loosen up their purse strings and it results in higher sales.

Hardware and Peripherals

Mohit Anand, Managing Director, Belkin India:
Its that time of the year again when expectations, surrounding Budget 2010, vibrates. Yet, for many specific reasons, this Budget is being watched keenly.

The main reason for the special interest about the Budget is that it comes on the heels of the national and global sound-bites surrounding economic recovery and, therefore, industry is looking for signs that the Budget will provide on the continuation.

There is a need to keep the Excise Duty/countervailing duty at existing levels to continue the momentum forward. Any increase at this stage, will result in price hikes and will impact the fragile recovery process underway. The IT industry has been one of the most negatively impacted industries as a result of the global economic recession and this is reflected in the negative growth even in domestic PC growth rates witnessed over the past few quarters. Thus it is imperative that the government continues to show strong commitment and support the industry get back to its high growth phase.

Though procedures have been implemented by Custom Department for refund of Special additional duty(SAD) which is currently levied at 4%, these are very time consuming and require enormous paper work. This results in the fact that this price benefit does not reach end consumers. I would expect that government do away with this levy altogether. This is as per government policy and is to be refunded to the importer of record on production of relevant paperwork. By doing away with this, the government will go a long way in simplifying a cumbersome process which will result in a price benefit accruing to the customer, which will in turn augment the recovery process underway and help the industry get back into growth mode.

Vaswani, Executive Vice Chairman, Intex :
Desktop penetration amongst the masses has still not gained momentum. The growth rate is declining. GDP growth is very directly linked to IT literacy and infrastructure, amongst various other parameters. It is time for the government to come out with a specific policy measure in this direction. The government is already thinking of adopting cloud computing technology for delivering e-governance services. It should also allocate funds for a scheme to enable homes and schools in villages to have the benefit of a PC. The digital divide issue has to be addressed more aggressively on the lines of Right to Education Act.

Under the umbrella of convergence, we have seen that mobile phones satisfy communication&information needs of masses and could play a major role in also bringing them into the banking system. Policy initiatives and fiscal incentives to promote local manufacturing of mobile phone components/accessories and complete mobile phones should be addressed. In this sector we have the potential to become a leading global player, aided by a huge domestic demand.

Storage and Information Management
Rajesh Janey, President, Sales, India&SAARC, NetApp:
The Union Budget 2010 will be crucial to determining market direction this year. However, this year its role will also be to safely guide India through the impending bounceback in global economy, with an eye on fiscal deficit consolidation in the short to medium term. For the IT industry specifically, I hope the budget will provide the much needed boost, in turn relieving the pressure on the GDP.

Manoj Chugh, President, India and SAARC, EMC Corporation:
The most important direction expected in coming budget would be tax rationalization and a clear roadmap for GST implementation within the next 12 months This would bring transparency and bring simplicity in the tax regime and allow businesses more flexibility on operations across the country. Further, the government should allow 100% depreciation for software spends by corporations. Investment in IT both hardware and software is a productivity enabler, which should be encouraged during tough market conditions. Lastly, professionals should be allowed tax rebates for skills upgrade training costs. This will encourage the Indian workforce to remain globally competitive and strengthen our ability to move up the value chain.

Naresh Wadhwa, President&Country Manager, Cisco India and SAARC:
The budget should provide a strategy for investment led growth and stimulate demand through fiscal measures. Though the industry is conscious of the problems of fiscal deficit, the government should pursue its focus on fiscal consolidation after the economy has recovered strongly.

While the corporate tax burden needs to be cut, the budget should make provision for investments in education, secondary and vocational in particular, broadband, infrastructure and the power sector, all of which are critical to socio economic growth of the nation. The government must create a National Technology Acquisition Fund to increase technology infusion in micro, small and medium enterprises (MSME).

In the Education sector for instance, while rightful importance is being attributed to the basic foundation of education through programs like the Sarva Shiksha Abhiyan (SSA), the focus on secondary education should increase. Also, budgetary allocation towards technology that makes distance learning initiatives viable would help to ensure access to quality education and vocational courses in remote rural areas.

One also looks forward to budgetary allocations towards some major e-governance projects, executed under the PPP (Public Private Partnership) model. Projects for citizen services should be given due importance. For instance, Investments in Common Service Centers (CSCs) in rural India to expand beyond their primary tasks, to provide information and services to meet rural needs in agriculture, education, vocational training, health and hygiene, would be welcome.

Technology-based infrastructure such as broadband through traditional wired modes, or leap-frog to wireless modes, would also ensure that inclusive growth involves every corner of the nation, and is not limited to urban India alone.

In order to help India tide over its energy crisis, investments in the power sector especially alternative and energy resources like wind energy are also the need of the hour.

The economic slowdown of last year has somewhat affected corporate investments. The budget should facilitate companies to retain more investible funds for modernization and expansion.

As one of the sectors critical to Indias emergence as the next economic super power, the IT sector has considerable expectations from the Budget. The extension of the tax benefits beyond 2011, under the Software Technology Parks of India (STPI) scheme would enable the Indian IT sector to compete with other countries globally sustain its global edge. These incentives will help the small and medium businesses in particular, a key growth sector that accounts for 40% of the exports made from software technology parks.

The modern parts of the economy manufacturing, transport, housing have made barely a beginning in the mission to becoming more energy-efficient. Tax subsidies and investments in research and development in the renewable energy space will make clean and green energy accessible to corporates and individuals.


Diwakar Nigam, MD, Newgen Software:
The IT and ITES sector has been the fastest growing segment for Exports and has also been largest Job creator in the country. With downturn in the US economy, business has been tough and Appreciation of the Rs. has not helped. The Industry needs an Extension of Tax Holiday by 5 years in existing STPs. The new SEZ scheme has not caught on, also not viable for small and medium sized Software Companies. Hence Extension of Tax Exemption for 5 years is a must.

One of the major problems being faced by Software Product companies is confusion related to tax. The question is whether it is Excise or Service Tax that is applicable on Software Products. There is need for clarity and there is urgent need for clear guidelines and notification. As already mentioned, the issue that needs to be addressed is the extension of Tax Holiday by 5 years in existing STPs. The new SEZ scheme is not viable for the small and medium sized software companies.


Surjeet Singh, Chief Financial Officer, Patni:
As we approach the Union budget for 2010, we expect the government to remove ambiguities and draft a clearer tax reform policy, that will facilitate faster and more equitable economic growth. In terms of the IT industry, we would like to root for the extension of income tax holiday referring to Section 10 (A) of Income Tax Act. The expiry of this provision coupled with the anti-outsourcing political legislation in the US could make India an uncompetitive off shoring destination.

We would also like to see some tax sops on R&D to accelerate progress on Indias R&D and innovation activities.

Lalit Sethi, Chief Financial Officer, Tilaknagar Industries Ltd. (TI):
India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies. In last 10-15 years, Indian taxation system has undergone tremendous reforms. The tax rates have been rationalized and tax laws have been simplified resulting in better compliance, ease of tax payment and better enforcement. The process of rationalization of tax administration is ongoing in India.

TI strongly feels the need of rationalizing and simplifying the tax structure, especially for the food and beverage industry. Although primary agricultural commodities are predominantly enjoy tax exemptions, processed foods are subjected to multiple levies. There is therefore an urgent need to rationalize and simplify the tax structure.

TI understands that our Finance Minister has a daunting task ahead of him of effectively striking a balance addressing the interests of the common man and garnering more revenue for a sustained, inclusive growth. At the current juncture of shaky economic revival, the question looming large is whether the economy would be able to sustain the recovery if the fiscal stimulus package is withdrawn.

Two major tax reforms, namely the new Direct Tax Code (DTC) and the Goods and Services Tax (GST) are on the anvil and people would want to know what contours these proposed tax reforms will assume. The government\\\'s stated intent is to bring stability, simplicity and rationalisation in the tax structure. This is indeed a welcome move and should be further backed by continuous strengthening of the tax administration.

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