Budget 2007-08 overlooks IT industry's contribution

Wednesday, 28 February 2007, 06:00 Hrs
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Bangalore: India's booming technology industry expressed disappointment over the lack of pro-active measures in the union budget for 2007-08 to accelerate the growth in the knowledge sector.

i-Flex Solutions CEO Deepak Ghaisas said the budget had failed to address some of the concerns related to the growth and expansion of the IT industry in the sub-continent.

"There are no major signals on upgrading infrastructure. Estimates point out that the IT industry alone would require a massive $100 billion infrastructure for maintaining its present trajectory growth. But there is no mention about it," Ghaisas said in a statement.

The IT industry had some expectations from the budget. But the finance minister has overlooked them. If he has introduced any measure, its impact is more negative", he said.

"For instance, the industry hoped the government would consider extending the software technology park scheme and section 10A of the IT Act beyond 2009, as they have a huge bearing on the SME (small and medium enterprise) companies.

Though most IT firms are already paying corporate and other taxes, the MAT (minimum alternate tax) imposition on the industry will have a negative impact on small and medium enterprises (SMEs) who do not pay any tax," Ghaisas pointed out.

Similarly, the imposition of fringe benefit tax (FBTs) on Esops (employment stock options) is surprising. It will make the current Esops expensive and difficult for the industry to use the incentive as a major tool to attract talent, he said.

Absence of further clarification on the SEZ scheme will hold up IT firms from finalizing their capex plans in the coming fiscal.

The budget, however, provides incentives to increase investment in the education system - both at secondary and higher levels. It is a vital requirement for the IT industry as the shortage of talent is a major constraint, the CEO said.

"The planned expansion of expenditure on e-governance is a good signal for the IT industry. It will serve to expand the domestic market and IT firms will see government spending coming their way," Ghaisis added.

According to Accenture India executive Sandeep Arora, the budget for 2007-08 is a mixed bag for the IT sector. Though all technology firms have been brought under the ambit of the MAT, the impact will not be much for big IT firms, which already pay 12 percent tax.

"MAT will; however, impact the net profit of SME firms. Similarly, FBT on Esops will be an additional burden on IT professionals. On the flip side, the pass-through status for venture capital funds (VCFs) investing in IT start-ups relating to hardware and software development will promote entrepreneurship," Arora said.

Storage Networking Industry Association vice-chairman Rahul Gupta said the budget was quite disappointing because it had not even acknowledged the contribution of the IT industry despite contributing substantially to the exchequer through taxes and other receipts.
Source: IANS
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