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“Budget 2013 has been disappointing for the IT-BPO sector. The main issues raised by the industry like rollback of taxation on software treated as royalty, removal of the minimal contiguous land requirement for SEZ’s, dual levy of VAT and service tax on domestic software sales and more clarity on transfer pricing norms for the sector have been left unaddressed,” said Pradeep Udhas, Partner & Head of IT/ITES, KPMG in India.
Udhas is hoping that that the Finance Minister will keep his promise of releasing the findings of the Rangachary committee by end of March 2013.
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Despite this, the industry is finding that not all is lost. The FM did say that the rules on Safe Harbour will be issued after examing the reports of the Rangachary Committee appointed to look into tax matters relating to Development Centres & IT Sector and Safe Harbour rules for a number of sectors. The rules are expected to be announced by March 31, 2013.
The industry is hoping that the FM’s incentives to small and medium businesses will be a boost for the firms in the IT sector as well. The FM said a company investing Rs 100 crore or more in plant and machinery in April 1, 2013 to March 31, 2015 will be allowed 15 per cent investment deduction allowance apart from depreciation.
The biggest positive from Budget 2013-14 came for the hardware industry. While the Electronic Policy was announced a few months back, FM said that the incentives to semiconductor wafer fab manufacturing facilities will continue, including a zero customs duty for plant and machinery.
"It is a pragmatic and practical budget based on the situation. The budget is largely positive for the industry and economy at large. But there are a few disappointments for the industry as well. Corporate tax has gone up by an increase of surcharge on tax from 5 per cent to 10 per cent. No reduction in MAT rate on business carried out in SEZs. We hope these areas will be addressed separately, later,” said Keshav Murugesh, Group CEO, WNS.
The focus on skill development and creation of employment is being looked as a positive. The budget talks about a target of skilling 50 million people in the 12th Plan period, including 9 million in 2013-14.
Even though the FM did not give any incentives to the industry, he did speak about the role of technology in some of the large projects. For instance, the ambitious plan to modernise the postal department at the total cost of Rs 4,909 crore. For the year 2013-14 the government will have a outlay of Rs 532 crore.
