The Union Budget 2012-13 has nothing on the table to bring cheer to the Information Technology and ITES sectors which pleaded for relief from Minimum Alternate Tax imposed on SEZ units and boost to the SME sector.
Mr. B. V. R. Mohan Reddy, CMD of Infotech, said the budget has provisions to improve IT consumption through the Rs.14,233 crore UID project and its use in the Public Distribution System. “But, the overall the impact of budget on the IT sector is neutral.”
The positives for the IT sector came in the form of Transfer Pricing as the Finance Minister talked about advanced pricing agreements which will give relief to the sector from litigation. The other encouraging feature was the number of areas in the negative list exempted from service tax. “It will give relief for our cash inflows. Being an export-oriented sector, we will not have too many debits coming to us”, he said.
Abolition of MAT
But the big disappointment was that the budget skirted the demand to reduce 19 per cent MAT imposed on SEZ units last year. “We appealed for abolition of MAT or at least its rationalisation,” Mr. Mohan Reddy said. The Government which allowed the registration under SEZ status till March-end, 2012, however did not concede the IT industry's appeal to extend the deadline to commence operations beyond March 31, 2014.
Mr. J. A. Choudhary, past president of ITsAP and Executive Chairman, Talent Sprint, said with no measures to incentivise SMEs, it will be difficult to create future Infosys. The imperative to take the IT to tier II and III cities too was ignored. The sector hit by attrition, shrinking profit margins, European crisis and move to tax companies in US outsourcing to India, looked for relief in budget in vain.
Echoing the same view, ITsAP President L. Suresh said with the hike in service tax across the board, the budget turned out to be a lacklustre one for IT sector.
However, the IT industry as a whole welcomed the allocation of Rs.1,000 crore for skill development and loans for students as good quality human resources are life line of the sector.