Karnataka budget hikes tax on IT products

Tuesday, 20 July 2004, 07:00 Hrs
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BANGALORE: Karnataka has increased the tax on IT products, including software and hardware, in its budget for fiscal 2004-05.

Presenting the budget in the state assembly Monday, deputy Chief Minister S. Siddaramaiah, who also holds the finance portfolio, enhanced tax rates on computer software, hardware, peripherals and cleaning kits to 12 percent from five percent.

Tax on computer consumbales will increase to eight percent from five percent.

At the post-budget briefing, Siddaramaiah defended the hike on IT products, including works contracts on software programming.

"Since all software and hardware firms in the IT sector are profitable, I expect them to contribute some amount to the government," Siddaramaiah stated.

Asked whether the measure would affect the pro-IT image of the state, the minister said the increase was only marginal, ranging from three to seven percent.

"The IT industry in Karnataka has been a success story. It has been performing consistently well, posting higher revenues and profits.

"The exporting firms have also been doing well. I am sure they can afford to share a small burden of the government in meeting its commitments," Siddaramaiah pointed out.

Industry representatives, however, criticised the proposed hike in tax and termed it a retrograde step.

"By increasing the tax on hardware, software and peripherals, the total cost of ownership will go up proportionately.

For instance, the retail price of a computer will shoot up by 1,800 to RS.2,000 with the seven percent increase on taxes. This will apply to even the assembled PCs," said G.S. Raghu, managing director, Chirag Information Technologies.

IT bellwethers Infosys and Wipro sought more time to respond as they were yet assess the impact of the tax on software and hardware sales.

Source: IANS
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