Budget 2010 Roundup: Impact Of Budget On The IT And Mobile Industry
Like every other budget, this year’s budget too had highs and lows for different sectors, especially the IT sector and the mobile sectors. We also have some good news for startups from this year’s budget. And there were strange announcements like tax for personal internet downloads, too! For those who could not catch the budget action live, here is a brief roundup of the budget showdown from the IT & Mobile Industry point of view.
Good News For Start-ups!
This year’s budget is a blessing in disguise for small businesses and start-ups in the country. The limit turnover for the purpose of presumptive taxation and audit has been increased. Here are the details in a nutshell.
- Limits for turnover over which accounts need to be audited have been enhanced to Rs 60 lakh for businesses and to Rs 15 lakh for professions.
- Limit of turnover for the purpose of presumptive taxation of small businesses has been enhanced to Rs 60 lakh.
The Mobile Industry
It looks like the Finance Minister, Mr Pranab Mukherjee, has a soft corner for the Mobile Industry in India. In his budget speech, he proposed various points that go all way in the favour of the mobile industry. Here is his provision from the Budget for the Mobile Industry in a nutshell:
- Parts used for the manufacture of battery chargers and hands-free headphones have been exempt from basic duty, countervailing duty (CVD) and special additional duty (SAD).
- Validity of the exemption of 4 per cent SAD exemption on mobile phone parts, components and accessories has been extended to March 31, 2011, from the earlier June, 2010 deadline.
- A full exemption from customs duty has also been extended to additional specified capital goods and raw materials for the manufacture of electronic hardware.
All these tax reforms and announcements have received a positive feedback from various players in the industry. Mr Ambrish Bakaya (Nokia’s Director for corporate affairs) said that the budget has responded positively to the industry’s request on manufacturing of parts and accessories of mobile handsets in India which will in turn help bring more investment in the area to the country and encourage domestic manufacture of parts and accessories. This could actually spur mass local production of key accessories and components.
There is some bad news for the companies offering 3G services as the Government has decided that these companies will not be allowed to claim any tax breaks under Section 80 IA of the Income Tax Act which could further queer the pitch for new and foreign players planning to bid for the 3G auction.
The IT & PC Manufacturing Industry
While the budget had highs for the mobile industry, the people in the IT & PC Manufacturing Industry are not very happy with the announcements made by the Finance Minister for this sector. The Union Budget’s proposal for an increase in the excise duty to ten per cent from the existing eight per cent may see hardware prices (for desktops, notebooks and servers) go up by a marginal two per cent.
Also components such as microprocessors (other than motherboard), floppy disk drives, hard disk drive, flash drive, CD/DVD and combo drive meant for external use will now attract four per cent excise duty as a result prices go up for these too as Budget proposes to withdraw exemptions on these components. However exemption of SAD on pre-packaged goods for retail, as mentioned earlier, is also a welcome step.
The IT Industry of India is not happy either with this year’s budget announcements. The budget proposes to raise the minimum alternative tax (MAT) rate from 15 per cent to 18 per cent as a result of which all IT companies now have to pay a minimum of 18 per cent tax. This is immaterial of the fact whether they operated under the Software Technology Parks of India or the Special Economic Zones or not. This announcement is a bad news, especially for small IT and BPO companies that typically have tighter cash flows and have to pay a minimum of 18% service tax.
Tax For Internet Downloads!
According to a very strange proposal at this year’s budget, you will now be charged for any personal downloads that you do on your PC. From now on whenever you download a gaming software, application software or a mobile software from any foreign provider for your personal use, you will liable to pay a 10% service tax to the government. It is not very clear so as to how the tax system for downloads would be implemented – whether the Internet Service Provider will keep a track of the taxes and bill the customers or the consumers themselves will have to keep a track of downloads and pay taxes accordingly because it would be impossible to ta.
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Source: Debjit Saha
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