PC stirs things up in IT, ignores telecom

Budget 2006 fried the software industry8217;s hard drive on Tuesday by imposing an 8 per cent tax on packaged software. While software make...

Budget 2006 fried the software industry8217;s hard drive on Tuesday by imposing an 8 per cent tax on packaged software. While software makers immediately protested the move, Finance Minister P Chidambaram softened the blow by opening a three-year window for IT companies to rope in high tech manufacturing investments with government support.

The FM promised viability gap funding for the semiconductor industry, in line with international norms, through IIFCL. The funding will go into manufacturing units for flat screens, plasma displays and advanced storage devices in the next three years.

Budget 2006 also set right an inverted tariff structure in the PC manufacturing industry through a 12 per cent excise duty levy and removal of a 7 per cent countervailing duty CVD. Domestic hardware manufacturers represented by MAIT said the twin moves will prove a shot in the arm for local manufacturing.

8216;8216;The 12 per cent excise duty will establish a seamless CENVAT chain for PC makers and facilitate local sourcing of components to promote local manufacturing,8217;8217; said Vinnie Mehta, executive director, MAIT. In cases where there could be marginal price increase.

The move also opens a window for manufacturing and service industries to offset this excise duty against their excise or service tax, hopefully to encourage IT consumption. The consumer electronics industry, however, was not moved much by the Budget8217;s cuts in steel and plastic prices.

8216;8216;I do not see any major demand creation linked with price cuts being passed onto consumers,8217;8217; said Ravindra Zutshi of Samsung India.

Inexplicably, the FM has imposed an 8 per cent duty on proprietary software sold over the counter. This, said IT industry body Nasscom President Kiram Karnik, will raise prices and have an adverse impact on millions of customers and on the domestic IT market.

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The IT industry also has its hopes pinned on the National e-Governance Programme, which, the FM said, will take off in a big way soon. 8216;8216;The commitment by Government to increase spending on e-Governance will help percolate benefits to the general populace including those in rural areas,8217;8217; said Krishan Dhawan, Managing Director, Oracle India.

On the telecom front, there was widespread discontent despite assurances that the Indian Telegraph Act will be amended to allow Universal Service Obligation Fund USOF proceeds to go into rural cellular mobile services.