2013 IT re-budgeted


Business enterprises in India had been fairly cautious for a while regarding their Information Technology budgets for the fiscal year 2013, which on the final revelation, have not seen a very commendable rise. On the plus side though, the sentiment of the IT industry still seems to waver towards limiting their expenditure on data analytics, mobility, cloud computing and other integral emerging technologies, only to improve the efficiency of their core businesses.

Opinionated market gazers have given their verdict on the financial nature of the IT industry, even though it does not seem to butter the bread in accordance with updated 2013 Union Budget. Industry critics foresee the expenditure for technology witnessing a continued growth in the year 2013, but at a reduced rate than that of last year. Keeping in mind that the budget 2012 did not prove to be quite a winner for the industry, one would want to put their money on what comes out of the horse’s mouth. Gartner has estimated that the IT services market in India should rise up to around $10.2 billion in the present year, which amounts up to Rs 56,814 crore. A total of a 12 per cent hike from that of 2012, where the growth was already at a stipulated rise of 18 per cent.

Looking back, there was a time when Information Technology was considered as a subsidiary service, but with the past condition of the market and the oncoming of the budget, companies are now counting on IT expenditure as an onward accessory towards achieving operational excellence.

Here is an assimilated look at the expectations and financial fate of the IT industry this year:

· The incoming profit that is received from special economic zones (SEZs) will now attract a reduced alternative tax known as MAT. A minor tax turbulence in the Union Budget 2013 will provide a supporting hand to various small and medium IT companies, helping them shift their respective businesses to SEZs.

· The licensing of software has been attracting service tax as well as value added tax (VAT) and the sector now hopes to pull a sigh of relief with the reduced glitch which would lessen the weight of duty on software end users.

· Same is the case for hardware firms where previously the duty resulted in reduced prices for imported products in comparison to the ones that were locally assembled. The latter here hopes to go through a role reversal.

· Mobile phones will now be priced higher than the cost at which they were previously floated at. The mobile sector will be subjected to a custom duty of 6 percent for all phones above the price category of Rs 2,000; the previous duty on which was a mere 1 percent. This is going to provide a boost to the lower segment mobile phones and add an additional 4-5 percent to smartphones and 3G enabled handsets.

· Another increased hike that is considered to be a clubbed curse along with that of the mobile phone hike is the increase in excise duty on SUVs, several sedans, imported vehicles and yachts. To put it simply, the aristocracy and upper classes which according to Finance Minister, P Chidambaram, would not mind paying a little extra, have been aptly hammered.

· Another issue that the sector is hoping to be catered to by the budget is an increased financial support on the nation’s infrastructure and cyber security along with relieving hardware components from import duties.

· Moreover, the Software industry body Nasscom has also expressed that with the variable leverages on tax exemptions, it wishes that the government will shell out more in the coming year on initiatives that are IT defined. The hardware grouping Manufacturers Association of Information Technology is also on the lookout for more tax exemption.

· The Semiconductor industry has also received a much awaited boost with zero customs duty on the import of machinery and plants making it a win win situation at the manufacturing front.

Summing it up, the Finance Minister P Chidambaram expressed in his Budget speech that the government would soon be issuing a circular to provide clarity on taxation matters with regard to research and development activities in the IT sector, hereby supplying the unanswered expectations of the industry giants with balanced hopes letting them decide whether the Union Budget 2013 will be the lining outside or the cloud itself.

From ITvoir News Desk/Darab Bakhshi