Bangalore: Honchos of Indian IT industry Friday slammed the union budget for not extending tax holiday and increasing excise duty on packaged software and levying service tax on customised software. "The budget is not positive to the IT industry. Smaller firms should have been given tax relief to counter the impact of a sharply appreciated rupee. The increase in excise duty on packaged software will lead to increased piracy," Krish Gopalakrishnan, managing director and chief executive officer of Infosys, said in a statement here.

Wipro chief financial officer (CFO) Suresh Senapaty regretted the budget failed to address some of the outstanding issues of IT industry and ignored its representation on extending the tax holiday for export firms beyond March 2009,when the 10-year existing scheme expires. "We are disappointed there is no mention about the extension of tax holiday scheme for IT firms registered with the state-run software technology parks of India (STPI)," Senapaty told IANS.

Gopalakrishnan, however, complimented the finance minister for the significant relief in personal income tax, as it would help corporate India to check wage inflation. "Reduction in excise duty across the board and direct taxes will boost production and consumption, leading to growth. The economy is on a roll, allowing the government to invest heavily in agriculture, education and social sectors," he noted.

The IT industry also expressed disappointment that its representation for exemption of dividend tax and employee stock options from FBT (fringe benefits tax) were ignored. However, the industry lauded the government s effort to widen the talent pool and improve skill sets with greater thrust on education and vocational training. "For a knowledge economy, which will add the highest quantum to world s working age population by 2015,this is a step in right direction.

All industries, specifically IT industry, will benefit from these in long run," Senapaty added. Wipro personal computer business vice-president Ashutosh Vaidya said by not proposing any change in the tax regime for the IT hardware sector, the budget had allowed the industry to plan on a long-term basis. The one percent reduction in central sales tax (CST) to two percent is a welcome step.

Similarly, introduction of GST (good and services tax) from 2010 will enable better transactions and improve efficiency. The industry termed the increase in excise duty to 12 percent from 8 percent on packaged software a retrograde step, as it would burden end-users of IT products and services in the domestic market. iGate Global Solutions CFO N. Ramachandran said setting up more technology institutes will have a positive impact on the IT industry.

Schemes for establishing broadband, internet-enabled common service centres in rural areas and state-wide area networks (SWAN) will help spread IT to smaller districts across the country. Ravi Pandit, chairman of KPIT Cummins, said the budget had a lot to offer in the social sector spanning education, infrastructure and health. "The budget provides indirect impetus to the IT industry. The emphasis on education is timely as the supply side will improve to meet the growing demand for talent and skill sets," Pandit added.

Source : IANS