FM's Budget Looks Growth-Oriented: IT Bodies

by CXOtoday News Desk    Jul 11, 2014

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The keenly awaited Union Budget 2014 was welcomed by the industry majors like MAIT, CII and Nasscom. The decision to reduce customs on IT/telecom products, bridging the digital divide and setting up of smart cities were especially applauded by the industry bodies.

MAIT: The Manufacturers Association of Information Technology (MAIT) welcomed the change in the duty structure. “MAIT welcomes the long pending correction of inverted duty structure from the IT Hardware sector perspective. Also, some telecom products (non-ITA) have been made liable to 10% basic customs duty whereas all goods required for manufacture telecom products would continue to enjoy exemption from BCD. These steps will definitely help boost domestic manufacturing,” said Amar Babu, President, MAIT.

Special Additional Duty (4%) on all inputs/components used in the manufacture of Personal Computers (laptops/desktops) and tablet computers is being exempted. Duty structure on imported and manufactured computers have been brought at par by withdrawing exemption of CESS (0.3%) on imported computers. E-book readers has been exempted from BCD (7.5% earlier), benefitting education and other sectors.

MAIT also adds that some telecom products (non-ITA) have been made liable to 10% BCD whereas all goods required for manufacture of aforesaid telecom products would continue to enjoy exemption from BCD. This will encourage manufacturing.

Meanwhile MAIT has recommended other far-reaching measures to boost manufacturing of IT hardware products significantly. MAIT is expecting that they will be taken up in the current year.

Nasscom: Nasscom too believes that some of its suggestions were accepted by the government. “The announcements on a pan India digital initiative, funding for start-ups, district level incubator network and leveraging technology for good governance are welcome steps. These measures along with the initiatives on skilling, smart cities and ease of business, reflect the thrust on role of technology in Budget 2014,” said R. Chandrashekhar, President, Nasscom.

Nasscom also praised the government’s effort in addressing key concerns raised by it on transfer pricing issues. The APA rollback, usage of multi-year data for benchmarking and other announcements should help to improve the business environment in the country, it says.

“The budget proposal on proactively bringing a closure to the retrospective tax issue and setting-up a high-level CBDT committee should address industry concerns. There remain certain areas of concern, which could perhaps be addressed through subsequent guidelines and/or clarifications such as those related to royalty definition, Place of Provision of Service Rules,” it said.

SMEs has been given lot of emphasis. Rs. 10,000 crores corpus proposed for venture capital to encourage start-ups and entrepreneurs in the MSME sector. All government departments and ministries to be integrated through E-platform by 31 Dec 2014.Rs. 7060 crores have been allocated for Smart City projects. This will significantly push ICT deployment and ICT device penetration.

iSpirt: “The budget establishes the Government’s special focus on the Software Product Industry (SPI). The Government has embraced iSPIRT’s view that the SPI can transform India. In fact, the setting up of a Rs. 10,000 crore fund of funds to catalyse start-ups in the MSME sector fits very well with iSPIRT’s efforts to improve competitiveness among the Indian SME’s,” says Bharat Goenka, Tally Solutions & Co-Founder iSPIRT as he adds that the body is happy that the Government has recognized the need for a framework to be set up for resolving tax related issues. 

Goenka believes SPI is an enabler for many other industries like Defense, Electronics and Communications. Naturally, a healthy software product industry brings endless possibilities to the country prime among them employment. The creation of 100,000 Software Product Companies in India will lead to the creation of $500+ billion in market value in a decade and the upliftment of more than 30 million SMEs.

IESA: The budget was also applauded by the India Electronics and Semiconductor Association (IESA). “The budget is growth supportive, anti-inflationary as well as committed to fiscal consolidation and reviving growth in manufacturing. We believe the steps outlined for this sector and commitment from the industry will put India is on the journey of becoming the Design Led Electronics Manufacturing hub by attracting investments, promoting entrepreneurship and creation of jobs,” said Ashok Chandak, Chairman.

“The speed and focus of the Union Minister for Communication & IT and DeitY in capturing industry needs from the electronics sector is very heartening and is a major milestone towards vision of making India an ESDM powerhouse,” he added.

CII: Government has initiated a number of actions including increasing FDI limit in defence and insurance sectors which will improve the investment climate. On retrospective taxes, the government has given positive statements. Finance Minister has initiated a discussion with states to work out GST-related implementation issues. Provide investment allowance at 15% for 3 yrs to manufacturing companies which invest more than Rs 25 Crore in plant and machinery. Investments in roads and ports will improve infrastructure connectivity, improving the ease of doing business.

“Many CII suggestions such as reducing investment allowance, changing definition of MSME, setting up a start-up fund, and overhaul of the subsidy regime have found mention in the Budget. We believe that the Budget would set the tone for quick recovery of GDP growth and generation of new jobs and hope that it will be followed up by close monitoring and implementation of announcements,” said Chandrajit Banerjee, Director General, CII who believes these steps can stabilize the economy, boost investments, and encourage savings with a view to reviving GDP growth to 7-8% in the near term.