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Concerned about levies on software, hardware

These will result in higher prices and have an adverse impact on millions of customers and on the domestic IT market, says Kiran Karnik, President, NASSCOM.

india Updated: Feb 28, 2006 19:25 IST

NASSCOM congratulates the Finance Minister on containing the revenue deficit to a level better than the estimated and in projecting the aim of a 10% growth in GDP.

We are pleased at the various announcements with regard to the target for power, including the Hyderabad metro and urban infrastructure-and the proposed India Infrastructure Investment company.

As part of the knowledge sector, we are happy to note the 31% increase in budgetary support to education, which, we hope, will be backed up by some radical reforms in this sector.

The changes in the Fringe Benefit Tax are welcome, particularly the reduction to 5% for some heads for which the BPO sector was earlier paying 20%.

We are, however, deeply concerned about the increase in levies on packaged software and on IT hardware. These will result in higher prices and have an adverse impact on millions of customers and on the domestic IT market. It will be a setback to efforts to promote IT utilization in the Indian economy and for vital applications like education and health.

At a time when technology and market demand were driving down prices, we see this as a retrograde step. We feel this is an intended consequence of adjustments of excise, countervailing duty, etc and hope that the Finance Minister will correct this aberration.

The increase in service tax and broadening the net to cover some previously excluded IT-related services will not only raise costs, but will act as a deterrent to outsourcing work to SMEs.
We hope that the national e-Governance Programme will take off in a big way, bringing benefits to citizens, transparency and accountability to governance and growth for the domestic IT sector.

Issues regarding interpretation of Section 10A benefits have not been addressed in the Budget. We hope that the Finance Minister will settle them separately and quickly, so that unnecessary tax demands are not raised on the industry.

(Kiran Karnik is President, NASSCOM)

First Published: Feb 28, 2006 19:25 IST