The Hindu Business Line : Internet, mobile value-added services need fiscal sops

A vibrant Internet is a given for progression and global relevance. Robust Internet usage has multiple benefits – it enables economic opportunity, makes life easier for people and promotes innovation, and thus, is extremely important for the long-term socio-economic development of India.

In India, with four per cent Internet penetration, we are in a dire situation. Countries such as China and Brazil, who were once peers, have long outstripped us.

We have poor broadband connectivity, low wire line penetration and even with booming mobile usage, lion’s share of the wireless capacity is eaten up by voice. Despite 3G spectrum being allocated later in the year, data usage may not go up substantially, given the huge demand for voice.

Being on par with similar levels of sub-Saharan Africa puts us in a crisis zone, which requires immediate intervention.

As despite the obvious advantages of cost, connectivity and convenience, the pool of users – both business and mainstream consumers – remains exceedingly limited, fledgling industries such as Internet and mobile value-added services are in dire need of short-term fiscal incentives which would facilitate faster adoption by consumers.

The two broad focus areas in the upcoming Budget could be:

Building Internet access: Relax excise duties on mobile phones to encourage the availability of low-cost access devices; decrease the current overall levels of duties for imported items, including critical IT components, used in broadband networks; and equalise duties on inputs and locally manufactured goods with those that are imported.

To encourage SMEs: A 5-year moratorium on service tax can be considered on online advertising and online services to help SMEs grow and access new segments of domestic and international market; and Exempt cyber cafés from service tax for at least five years, as this would promote Internet usage especially in tier-2 and tier-3 cities

Shailesh Rao,

Managing Director, Google India