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Tuesday, February 26, 2002, Chandigarh, India  
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BUDGET — HOPES & EXPECTATIONS-III
Hardware sector seeks sops
Heavy agenda for Budget session
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| PCOs can be
made cyber
cafe: CEDTI SAS Nagar, February 25 The Ministry of Information and Technology has approved a project of the Centre for Electronics Design and Development to enable operators to convert their PCOs into cyber cafe. Announce tourism policy: PHDCCI
FII back-up is Bharti Tele forte
TCS centre for Melbourne
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BUDGET — HOPES & EXPECTATIONS-III The government has been very supportive to the software and service industry and the industry is hoping that it will continue to retain the incentives provided to help strengthen India’s position as a leading software superpower worldwide. We feel that the industry is not demanding any major fresh concessions but only urging the government to remove certain procedural bottlenecks in order to further growth in the software and services industry. The IT industry received a number of sops in last year’s Budget like exemption from taxation for online services. Indian companies that have issued GDRs/ADRs can invest abroad to the tune of $ 100 million or 10 times of their export earnings whichever is higher. The industry is urging the government to retain the IT industry’s current status in this year’s Budget.
The wish list Recommendations presented by Nasscom include: 1. The self declaration of Softex forms: Nasscom has recommended that the Softex form as well as Forms A and B should be dispensed with or be made into self declaration forms to avoid unnecessary paper work and delays in processing. 2. Clarification on onsite software development in Section 80HHE: Two of the most important demands of Nasscom are related to Section 10A/10B of the Income Tax Act. This section provides for income tax holiday to units registered with 100% EOU, EPZ, STP. Nasscom has recommended that a clarification should be issued that onsite services will continue to get income tax exemption with retrospective effect under the new Sections 10A/10B of the Income Tax Act. There is a narrow definition of computer software in 10A/10B sections of the Income Tax Act; with the result many income tax officials believe that onsite services exports are not exempted from income tax under the new Sections. Nasscom has also recommended that CBDT should issue clear guidelines on the method of computation of deduction under Section 80HHE and clarify the term technical services to exclude:
3. Section 10A/10B of the Income Tax Act is acting as a deterrent to mergers and acquisitions:
Another issue in Section 10A/10B is regarding a change in ownership and the tax treatment. As per the provision of new Section 10A/10B, if during the year, more than 51 per cent of shareholding ownership changes in 100 per cent EOU, STP, EPZ then the company will cease to get income tax exemption from that year. In listed companies, there is hardly any legal bar to change in shareholding pattern and we believe that the company should not loose its tax holiday status just because the ownership changes. This provision not only adversely effects listed companies but also unlisted companies. It also hits SMEs and start-ups, especially where the shareholding pattern may change with the exit of venture capitalists. This may constraint venture capital funding. Moreover, provision in the section is acting as a deterrent to mergers and acquisitions, which is today seen as an important step for future growth. 4. Dividends from overseas subsidiary companies of IT software and service companies should be tax-exempt: Another recommendation by Nasscom that affects companies is setting up overseas subsidiaries. Indian companies export software using various methods of operation and many times, they do not open branch offices in the USA, but open their subsidiaries. Technically, there may be a difference between a branch office and a subsidiary, but not for practical purposes. Both do same kind of software development work. As per the Income Tax Act, if an overseas branch office brings in profits from its overseas software activities into India, then it gets income tax exemption, whereas an overseas subsidiary for similar operations does not get similar exemption. This anomaly needs to be corrected. 5. Software services should continue to remain outside the purview of sales tax: Nasscom has recommended that computer software development and IT software services should be kept outside the purview of service tax in the domestic market. Various state governments have already reduced sales tax on software with the Government of Karnataka rolling back the sales tax on software to zero per cent. 6. No tax on e-commerce transactions:
Nasscom has demanded a tax moratorium of not having any fresh tax on e-commerce at least for the next five years. 7. Physical bonding by customs at IT software units at STP, 100 per cent EOU, EPZ should be removed: As per the current Exim policy and customs notifications, all units in EOU/EPZ/ STP are physically bonded i.e. equipment in these units cannot be taken out without prior permission of competent authority. The problem with physical bonding is that it involves procedural delays. For example, new units coming in Bhubaneswar have to wait for periods as long as one to two months because of want of customs inspection before they can start operation of the unit. 8. Enhancement of telecom infrastructure:
Nasscom has recommended allocation of resources for enhancement of infrastructure like airports and power at the major software cities of India and has also requested for at least 2 Gbps of national Internet bandwidth.
Other suggestions * Some opine that the government should give tax concessions for spending on IT infrastructure for companies. *
Some other recommendations include implementation of the recommendations of national IT task force for bringing down the street price of software and to retain zero import duty regime on computer software. The wish list also calls for a simplification of certain procedural bottlenecks related to ESOPs. *
The industry is looking forward to the assistance and assurance from the government that there will be no fresh imposition of tax and that the incentives continue to be long term. *
What some players in this industry are looking for is not sops but demand increase. They do not want specific giveaways from the government but what they want is some ways of increase in the demand, particularly in the domestic market.
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Hardware sector seeks sops There is a feeling among hardware vendors that the Budget generally tends to overlook the demands of the hardware sector while providing several sops to the software sector. The hardware sector has numerous demands that it wants the Finance Minister to address in the Budget. The wish list & expected measures
* One of the demands of the sector is the reduction in customs duty. According to industry sources, customs duty should be reduced on all IT and IT-related hardware items. These include reduction of duty on monitors, networking equipment, handheld computers and digital cameras. *
The sector is lobbying for a special domestic tariff area
(DTA) scheme as list-based exemptions may prove to be tedious. The scheme should have zero corporate tax for 10 years and a provision for the conversion of all existing units into the DTA scheme. Further there should be differentiation between distribution and reselling of imported hardware to indigenous and overseas customers. The implementation of the WTO ruling has been pushed back to 2003. However, the hardware sector feels that the implementation should be pushed back further to 2005. *
It is expected that the government can eliminate the 4 per cent special additional duty that is currently in place. The countervailing duty and excise duties could come down to 8 per cent from the current level of 16 per cent. To make the sector competitive, the Finance Minister should ensure zero customs duty on all capital goods that go into IT/electronics and telecom products. *
The wish list also includes the abolition of duty on all raw materials and components used as inputs, including dual usage items. |
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Heavy agenda for Budget session New Delhi, February 25 In a major departure from the past, the government will seek to dismantle the several shackles hindering the growth of agriculture and this will include an amendment to the Essential Commodities Act that would bring greater freedom in the trading of agricultural goods within the country and fetch better prices for the farmers. According to the pointers in the President K.R. Narayanan’s inaugural address to the Budget Session of Parliament, the sugar industry, which already has been delicensed, is to be decontrolled soon. Though there is a question mark on the proposed reforms in labour laws, which would make it easier for companies to hire and fire employees without going through red tapism, the government appears confident of seeing through the amendments in Parliament. As a sequel to that it is proposed that a bankruptcy legislation, which will allow quick payment of dues of workers and exit of non-viable firms, will be brought in the Budget session. Steps to strengthen rural credit cooperatives to provide loans to farmers at their doorsteps has been proposed. With harvest and post-harvest losses in agricultural commodities estimated at over Rs 70,000 crore each year, the government is determined to formulate a comprehensive strategy to check these losses. Construction of roads and highways, is likely to get a further impetus. Already the National Highways Authority of India is committed to spend Rs 10,000 crore annually for the next two years. The first phase is estimated to generate 19 crore mandays of direct employment. In addition it will create a demand of 10 million tonnes of cement, 1 million tonnes of steel and ancillary products. The Pradhan Mantri Gram Sadak Yojana for construction of all-weather rural roads will be further strengthened with the government proposing to enhance allocation for this scheme through non-budgetary resources. The session can see the government announcing a new policy initiative to encourage Indian-owned shipping companies to compete globally. After the dismantling of the administered pricing mechanism for petroleum products before April 1, 2002, the government will increase LPG distributorships in rural areas to increase the reach of cooking gas for people. The new tourism policy is being finalised and it is hoped that it will be brought in the present session. The government has given an assurance to the small scale sector to help it get over the problems of the removal of quantitative restrictions. If need be the government would announce more schemes to assist the SSI sector. Tobacco consumers face a tough time ahead with the government indicating that it will further strengthen the anti-tobacco campaign. Effectively this can mean an increase in the prices of tobacco products like cigarettes and pan
masala.
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PCOs can be
made cyber
cafe: CEDTI SAS Nagar, February 25 The focus will be on the semi- urban and rural areas where 95 per cent of the people do not have telephone connection. Mr Deepak Rana, Coordinator of the cyberpreneurship development programmee at CEDTI, said in the era of the IT, the PCO operators have to set up wire-enabled services. A special programme to train and extend financial assistance to the PCO operators has begun at CEDTI here. Mr Rana said the rural and semi-rural areas in Jalandhar, Amritsar, Ludhiana, Shimla and Panchkula are being targeted. The PCO operators are being told about the increase in their business after they set up the wire-enabled services. In a feasibility study conducted by CEDTI, it was revealed that 80 per cent of the respondents in the age group of 18 to 22 years regularly used Internet to mail and chat.
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Announce tourism policy: PHDCCI Chandigarh, February 25 The chamber in a press release suggested for identification and development of new tourist spots by involving the local bodies and development authorities and adoption of an integrated approach towards the development of tourism in Haryana, Delhi, Punjab, Himachal Pradesh and Chandigarh. To provide thrust to the tourism projects, roadside amenities, shopping complexes, leisure parks and facilities of hotels should be promoted in the state, the chamber said.
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TTK Services Syndicate Bank HCL Info centre Corpn Bank pact Allahabad Bank Mathur Mass Com |
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