Thursday, March 01, 2007

About Budget 2007-By IT Giants

Union Budget 2007 has disappointed India Inc. The IT industry seems particularly miffed at some of the proposals. Here are some of the voices from the industry on the Budget and the impact it would have on the sector.

"The impact would be substantial for the industry, but a little less for us as we pay slightly higher withholding tax in most key overseas markets such as the US and Europe and enjoy double taxation avoidance credit. The net negative impact for Infosys, therefore, would be about 1.5 % of our total net income."

- V Balakrishnan, CFO, Infosys Technologies

“We are dismayed at the proposal to extend MAT on export incomes which are exempt under Sections 10A and 10B. This is a regressive step that withdraws government’s commitment to provide tax incentives till 2009, on the basis of which companies have made their business plans and investment decisions. This could affect investor confidence and growth in this sector,”

- Kiran Karnik, President, Nasscom

"This is totally negative for the software sector since none of our issues have been addressed. He did not say anything about the continuation of STPI scheme nor was there anything concrete on SEZs. On the other hand, he has extended minimum alternate tax (MAT) to IT companies. They have also imposed a 1 percent education cess."

- Deepak Ghaisas, CEO, I-Flex Solutions

"It will definitely have a very negative impact on the sentiment. It is like the government has decided to pull back the support to IT industry mid-way through,"

- Manoranjan Mohapatra, President and CEO, Flextronics

"It would have been better if the government had looked at the positive benefits of getting higher personal income tax from the IT professionals rather than trying to erode our margins so seriously."

- Vishnu Dusad, Managing Director, Nucleus Software

"The good thing is that the government's overall push for e-governance projects, higher outlay on IT education, computerisation of PDF and FCI will result in a positive demand for the demand for PC hardware."

- Vinnie Mehta, Executive Director, MAIT

"There are some positives in the budget for the software sector like the increase in the allocation for e-governance projects, "pass through" status for tech VC funds and doubling of allocation for secondary education. But the negatives are that they've not spoken about the STPI. The introduction of MAT will have a significant impact on smaller IT companies. Bringing ESOP under fringe benefit tax has to be clarified because ESOPs are meant to retain talent."

- Ashank Desai, Executive Chairman, Mastek Ltd

"We appreciate the reduction in the rate of customs duty and the increased outlays for e-Governance. At the same time, the imposition of MAT on the deductions applicable to IT companies and increase in the Dividend Distribution Tax could have been avoided."

- Ravi Venkatesan, Chairman, Microsoft India

"With respect to MAT, though there is an increase in coverage of MAT for 10A/10B companies, there is the facility of carry forward of MAT which is available to all companies. So in effect we will not have much impact on profits."

- Amar Chintopanth, Executive Director and CFO, 3i Infotech

"We are also happy that the government has decided to increase expenditure on infrastructure and education, which will have a positive effect on the BPO industry. However we are disappointed with the introduction of MAT for companies which were formerly exempted from MAT under Sec 10A and 10B."

- Susir Kumar, CEO, Intelenet Global Services Ltd

"The imposition of MAT on the ITES industry is dissappointing as is the lack of any announcement on the exemption of the 10A-10B benefit beyond 2009."

- Ananda Mukerji, MD & CEO Firstsource

"A key task for industry and government is to increase the PC penetration rate by making the PC more affordable. We were hoping for drops in CVD (currently 16%) and SAD (currently 4%) on components/ peripherals to help the PC become cheaper. So no news, while being perceived as neutral impact, is actually bad news."

- Moninder Jain, Director, South East Asia & India, Logitech

"It is heartening to see that the Government is committed to e-governance, having increased the allocation both at the Center and state level, with a new scheme for manpower development in the software export industry. Computerization programmes for the public distribution system and FCI will also enhance efficiency and benefit the common man."

- Jangoo Dalal, President, India & SAARC, Cisco

"There is no change in the IT hardware industry, so prices remain the same. We had not expected any changes; in fact, we had recommended that no changes be made. We are happy with the budget."

- Raj Saraf, CEO, Zenith Computers

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