Financial Daily from THE HINDU group of publications
Friday, Mar 01, 2002
Overseas investment norms welcomed
THE Managing Director of Satyam Computer Services Ltd, Mr B. Rama Raju, said the increase in permissible investments abroad by Indian companies up to $100 million through the automatic route and in joint ventures up to 50 per cent of the net worth was a welcome move.
However, the taxation enforced on software profits was completely unexpected and a reversal in the spirit of the concessions granted in earlier budgets. The taxation, being imposed during uncertain times the sector was currently facing, was disappointing.
``With the dividend now taxable in the hands of the recipient and with the surcharge being increased to 5 per cent, the tax outflow of individuals will increase. The reduction in duties on hardware will have a positive impact on the prospects of the domestic IT sector and also reduce the cost of training,'' he said.
VisualSoft Technologies Ltd: The Chairman of VisualSoft Technologies Ltd., Mr.D.V.S.Raju, said, ``given the current economic condition, the Budget is a tight one. While the benefit to the hardware sector is encouraging, relaxation and liberalisation in investments limits for overseas investments and investments by FII and dividend tax liability on corporate sector are welcome.''
While the status quo on personal and corporate tax is good in the current industry scenario, the ambiguity on taxation of portion of revenue of 100 per cent EoU software companies needs to be clarified. If applied, it is a deterrent to the IT sector which as such is reeling under pressure.
Birla Tata AT&T: Mr S.K. Subramanian, Chief Operating Officer, Birla Tata AT&T, said the Budget had fallen short of expectations of all segments of the society and industry and would not really give the desired impetus to the economic growth. In telecom, the welcome move has been allowing carry-forward of losses in the mergers apart from minor changes in the handset duties.
Hyderabad Software Exporters Association: Reacting to the issues to related to the information technology industry, the President of the Hyderabad Software Exporters Association (HYSEA), Mr J.A. Chowdary, said the Finance Minister had gone back on his promises as far as the tax holiday was concerned by reducing it from 100 per cent to 90 per cent. This gave out signal that in the coming years, this percentage could be reduced further.
Electronic hardware industry was expecting a lot of incentives in terms of drastic reduction both in customs and central excise duty for the raw materials as well as goods, which would have encouraged many Indian electronic hardware industries to compete on a global scale.
On the other side, entertainment industry was given many incentives, which would encourage lot of content development for multimedia, animation and special effects for the entertainment segment.
According to Mr Chowdary, software development in the global entertainment industry would certainly increase and help in earning more foreign exchange. Increase in the budget outlay for science and technology would help in creating a vibrant R&D infrastructure for the technology sector.
InfoTech Enterprises Ltd: The Chairman and Managing Director of InfoTech Enterprises Ltd, Mr B.V.R. Mohan Reddy, described the Budget as extremely disappointing.
According to him, the manufacturing sector, which had less than three per cent growth during the current year, did not get any attention from the Finance Minister. This sector needs attention to sustain the growth projections for GDP.
On the issues related to capital market, Mr Reddy said the markets which were already in a very bad shape got a further jolt from the Finance Minister for the dividends would now be taxed in the hands of the receiver. ''This will therefore discourage people from making investments in the capital market.''
The removal of tax rebate on small investments like provident fund, life insurance and small savings will effect the income tax payers.
According to Mr Reddy, the only positive point in the budget was the stress on infrastructure. Investment being made in telecommunications, roads, ports and airports was encouraging. However, he said it was disappointing not to see public transportation as a major area of thrust.
Cognizant Technology Solutions: N. Lakshmi Narayanan, President and COO, Cognizant Technology Solutions, has said there has not been anything positive for the IT industry at large and for software in specific. The introduction of corporate income tax to the tune of 10 per cent of the income will greatly impact the small to medium IT companies. This would also have a debilitating impact on generating higher employment opportunities in the IT sector.
There has been a half-hearted approach to the IT industry in terms of giving it further fillip. Barring the 10 per cent reduction in customs duty for setting up earth stations and the mild concession for hardware and IT products there is nothing noteworthy for the IT sector.
The expectations on procedural simplifications in the areas of customs bonding and withholding tax have not been addressed. Likewise, there has not been a bold move to help the IT industry to use the Exchange Earners Foreign Currency Account (EEFC) effectively.
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