Budget Expectations from Industry Leaders

Finance Minister P Chidambaram will unveil the Union Budget for 2013-14 on February 28 in the Lok Sabha. Apart from the challenge of bringing down the fiscal deficit, the government has to do a balancing act to bring high growth and low inflation.  

The Indian IT and IT-enabled services industry here has sought the reduction in minimum alternate tax (MAT) to 5 per cent in the Budget 2013-14 for all IT companies operating in SEZs.

Below are the Budget Expectations from Industry Leaders:

Rajat Jain,
MD, Xerox India:

“I am looking forward to this budget for several reasons – but mostly because the global economic environment is calling for important initiatives in India that will lead us to continued growth.

1. To begin with, the government must continue the good work begun last year - where we moved to a negative list taxation regime for service tax purposes. This has led to overlap of VAT and service tax in certain situations. The FM can look at alleviating this hardship and higher costs for customers as this is against the spirit of GST. Industry has been waiting for the GST regime – and perhaps it is time for some provisions which advance the structure and spirit of GST, to be brought into this budget in the interim.

2. Furthermore, the precarious global fiscal situation around the globe and adverse forex movement for Indian importers, make it imperative that Government supports the industry with regulatory, tax and trade incentives. We can ill afford to lose the momentum gained in earlier years by not addressing the bottlenecks in our trade ecosystem, in turn allowing other fast emerging economies to capitalize on global opportunities.

3. Lastly - a conducive environment is imperative today, where ecosystem players come together to promote citizen benefits in sectors such as healthcare, education, IT and telecom, power and infrastructure. Budgetary allocations and policy reforms promoting local innovation, greater collaboration between industry players and the government and creating an environment for new investments in key development sectors is the need of the hour.

The time for action is now – and the budget is an indicator of government sentiment and investments in enabling what I believe should be inclusive growth – both social as well as economic – in this vast nation.

Govind Rammurthy,
CEO & Managing Director,
eScan

Budget 2012 pretty much ignored the IT Sector. But this year, the sector hopes for a better growth oriented budget, which will re-install business confidence, especially in the small and medium IT Companies.

eScan’s wish list for IT industry covers:

 1. Governments’ quick move on all the areas recommended by The Rangachary Panel, especially those relating to Transfer Pricing and safe harbor provisions.

2. The sector’s expectation for the concessions for small and medium companies, simpler tax structure for angel investors and policies to help develop infrastructure in tier II and tier III cities, to help ease business.

3. Currently there are very few profit-based tax exemptions available, such as for Special Economic Zones, backward states, etc. Investment – linked incentives are restricted to a select group of industries only. To promote industrial and investment growth, it is suggested to expand the scope of profit based tax holidays or alternatively the investment linked incentives to a large category of industries, including IT sector.

4. The present Minimum Alternate Tax (“MAT) at 18.5 percent plus surcharge imposes considerable cash flow constraints on fast growing India IT-BPO. Hence it is advisable that the rate of MAT be reduced if not eliminated altogether.

5. The current rate of corporate tax of 30% while not excessive is higher compared to rates in several other countries. There is also a trend for the corporate tax rates to be reduced by several other countries to attract investment. In this backdrop, it may be appropriate to consider a corporate tax reduction or, otherwise, atleast an elimination of the surcharge and cess.

6. A definitive timeline and roadmap for implementation of GST and similarly, more clarity on implementation of the DTC will be helpful.

7. More clarity with regard to treatment of Software being goods or services, which will avoid the present dual taxation.

All in all we expect a healthy, responsible and growth supportive budget, which has the potential to turn out to be a game changer for the Indian economy that is currently witnessing a below potential growth along with high inflation.

K M Nanaiah,
Managing Director,
Pitney Bowes India. 

“Globally, the economic condition is a little uncertain. In India, look forward to decisive measures to boost our economic growth by facilitating domestic demand and development. The mail and logistics industry in particular, needs an enabling infrastructure that will help streamline and fuel growth in this industry. Technology plays a key role and reducing tariff barriers on new technology induction will provide the necessary impetus.”

Guruswamy Ganesh,
Vice President and Country Manager,
Freescale Semiconductor India

Various reports peg India share at an estimated 11 percent in the global electronics market by 2015. The semiconductor policy 2012 was well needed effort by the government to provide an impetus for the growth of semiconductor and electronics industry in India. While, it has come too late when other Asian countries have already made a mark, but the good news is that it’s finally here.

While on one hand Government is trying to woo the investors by announcing such policies, enough attention is not being paid at the present system that results in coercive tax measures that are hurting the industry sentiment with lot of time being spent on tax litigations. As per the Directorate of Transfer Pricing, there are about 3,500 transfer pricing litigation disputes amounting to near about INR 111299 crore for 2010-11 and 2011-12. This makes India the country with third largest number of pending cases related to transfer pricing in the world, says the global consultancy E&Y. 

The government proposed the Advance Pricing Agreements (APA) in 2012 to provide a solution to the ongoing transfer pricing litigations. However, the outcome of this will come in 3-4 years from now and by then the total quantum of money involved in pricing litigation will increase many folds. Tax litigations at tribunal level are increasing year-on-year due to the pro-revenue tax orders passed by the various tax authorities. While, as per the Income Tax law a period of 4 years is recommended to resolve such litigations the provision only provides for 6-12 months stay on the tax demand. At the end of the requisite stay period businesses are at the mercy of the tax authorities and subject to their coercive tax collection measures. Such anomalies in the law adversely a ffect countries image as an investor friendly economy. Government needs to take enough efforts to position India in the world economy by coming up with serious tax reforms including introducing fast track tribunal benches for early resolution of litigation, time limits for deciding pending cases, fair judgement and accountability.

Arunn K Asthaana,
MD & CEO,
VVIDIA Communication.

We expect the Budget 2013-14 to take steps to increase broadband penetration. One of the way of increasing penetration is by making it affordable to the end-user especially on mobile. Internet, like telecom services, attracts 12 per cent service tax is acting as a deterrent. Abolishing service tax on mobile internet/broadband services in Budget 2013-14 would make it affordable and boost penetration as well as help in empowerment of users through knowledge and information in non metro as well as rural India .

We will appreciate if the service tax is abolished on telecom Value-Added Services (VAS) and it should be treated as supply of service.

We expect the union budget to create a world-class start-up ecosystem by 2015. The start-up ecosystem is must for driving innovation and growth in the country. VVIDIA Communication expects Budget 2013-14 to focus on setting up industry-ready incubators, expansion of incentives for private incubators, funding support and incentives for entrepreneurs to set up a venture would provide the necessary thrust to the ecosystem.

The budget should also provide some specific incentive to MNCs/ large enterprises to collaborate with start ups and young companies in early growth stage to develop core intellectual property. Further, we at VVIDIA like the Budget 2013-14 to provide for an income tax-exempted venture funds to fund young companies in early growth stage. The country needs to replicate institutional mechanisms to bootstrap growth in start-ups and young companies, similar to what the STPI scheme did for the services companies in the 90s.

V. Laxmikanth, Managing Director, Broadridge Financial Solutions

Investment

Tweak the taxation policy including Rent Allowance, Capital Gain Scheme, Rebate for Senior Citizens, Leave Travel Assistance, Gift Tax, Goods and Service Tax & Financial Exemption Limits.

Utilize Cash Reserves in PSU's

More Infrastructure Investment support

Consumer

Export revival to be focused - CAD as a % of GDP has witnessed a secular rise in recent years. One of the key factors is the continued deceleration in exports growth. While imports have not declined at the same pace due to high oil and gold imports. India's wide CAD is prolonging the weakness in the Rupee against the US dollar

Inclusiveness - the Government has implemented several measures for state specific targets - gender and related issues, much more needs to be done across sectors of the society. 

Education and Skill Development - quarter of the population is still illiterate and the progress made is slow, this needs to be accelerated

Healthcare - yet to develop fully and become more favorably. Today 70% of Indians spend out of their pockets to meet healthcare expenses. Based on demand its prudent that the government needs to assist making this further favorable.