MUMBAI, FEB 29: Nandan Nilekani of Infosys Technologies had his wish fulfilled today as Finance Minister Yashwant Sinha decided to tax all exports, including software. The industry, however, is peeved with Sinha's move. India's software exports are at present around $4 billion and industry leaders feel that is too early to tax a fledgling sector. The finance minister announced in the budget that during the next five years, all concessions given to exports-based industries will be brought down to zero level through a 20 per cent reduction each year. The general reaction is that the move to remove a zero tax status and slap it with a 7-7.5 per cent tax could have been avoided in the interest of the industry. Says Aptech Ltd managing director, Ganesh Natarajan, any kind of tax at this juncture when the industry is growing at a good pace will not be good. It will prevent the entry of new enterpreneurs. Nilekani had on Thursday gone on record saying that the software industry had reached critical mass and it would have to pay taxes like any other industry. The software exports at present stand at $4 billion and the government has set an ambitious target of $50 billion by 2008. "I think the duty should have been imposed at an export level of $12-15 billion," Natarajan felt. Earlier this month, the IT minister Pramod Mahajan told the Nasscom conference that the government would do all possible to encourage entrepreneurs to improve exports. "For India to become a major player, we need thousands of companies there," he had said. "This move will discourage them," Natarajan said. He said that the move may be reviewed and revised. "The government would have waited for another 2-3 years before taxing it," he said. Softplus India managing director Vijay Uttarwar agreed with him and felt that the new companies required tax benefits in the initial stages. Telecom sector will gain major benefits through the sops announced in the budget for 2000-2001. The finance minister has brought down duty on equipment imported by Internet Service Providers (ISPs) and opitcal fibre cables to 5 per cent from 15 per cent. The biggest beneficiary will be cellular handsets, which now attracts 5 per cent instead of 25 per cent earlier. According to Videsh Sanchar Nigam Ltd (VSNL) director, operation, Amitabh Kumar, the move will enable the ISPs to have better and quality equipment for better service. But he felt that this might not have an impact on the price of Internet service to the end user. "Today, the pricing of Internet usage has already become a game to attract more users and the cost does not influence much," he said. On the duty cut on optical fibre lines, he said that VSNL does not stand gain much since it uses the under sea cables which are any way duty free. Internet Service Providers Association of India (Ispai) chairman and Datapro CMD Rajiv Arora felt that the government would have accorded infrastructure status to the ISPs. However he welcomed the move not to impose any fresh service tax on Internet providers. Hardware woes continue MUMBAI:The reduction in duty for a number of computer components may not result in big demand for PCs, feel the hardware companies. The industry estimates a minor 3 or 4 per cent rise in PC sales growth besides the current growth pace of 10-20 per cent. Instead, it says that the government should have reduced the excise rates. The initial estimates from some of the leading makers are that these combined will result in a saving of Rs 1,000 to Rs 2,000. Says a leading manufacturer and Zenith Ltd managing director Raj Saraf, "There is a 3-4 per cent reduction in duties overall, which does not mean much to the PC makers.'' He felt that the government should have reduced the excise duty from 16 to around 8 per cent if it wished to improve the PC growth. The finance minister has reduced the custom duty on many computer hardware items on various scales. The computer components have been subject to 15 to 0 per cent changes. The import duty on three critical components such as computer motherboards will be cut to 15 per cent from 20 per cent. While floppy disk drives will also see similar drop in duty, the semiconductors will be charged at 5 per cent from the current 15 per cent. The duty on microprocessor, storage devices, CD, micro assemblies and integrated chips will attract zero duty from the present 5 per cent. The graphic display cards used in the computer colour monitors will also come under the zero per cent duty category. "A drop of Rs 1,000 in PC prices will not it attractive," Saraf said. He, however, felt that any estimation of sales volumes would be difficult. Nasscom chairman Atul Nishar said that the reduction in customs duty should result in more PC penetration. "The reduction in duty will lead to greater PC population and more Internet usage," felt VSNL director Amitabh Kumar. The low PC usage is a stumbling block in the growth of Internet usage. The printer consumbale manufacturer Abee Info-consumbales director BB Somani also felt that the overall reduction in duties on computer components will result in growth for related items like printers. The present structure of the component sales also included local taxes and sales tax.
