Union Budget 2016 evokes mixed reactions among channel partners

The IT channel industry seems to have not very impressed with the Union Budget 2016-17. While channel partners hailed some of the announcements by the finance minister Arun Jailtley like Startup India initiative, most of the partners and prominent IT associations expressed disappointment over not addressing the crucial issues like E Commerce, Excise duty, GST, double taxation, etc. Overall the channel has termed the budget ‘not very exciting’ from the point of view of ICT business.

NASSCOM welcomed the Union Budget 2016, while terming it as a mixed bag for the sector. “Our wish list for Budget 2016 included three key priorities – policy bottlenecks, including ease of business; nurturing startups, products and eCommerce sector; and clarifications on transfer pricing to enable inward investments in India. Budget 2016 only partially covers these priorities. Extension of Section 10AA for SEZ units till 2020 is a positive outcome though the imposition of MAT on Start Ups will not allow the full impact of the benefits to be realized”, said Mohan Reddy, Chairman, NASSCOM.

However, NASSCOM pointed out that crucial issues pertaining to the software industry were not taken up in the budget. The association said that key proposals like removal of dual levies on software products, Angel taxation, higher long term capital gains tax, pricing issues related to safe harbor margins, APA roll back rules etc. were not notified in the budget. It said that clarifications not provided in place of the provision of service rules and no there is a roadmap on MAT and different cess rationalization.

MAIT expressed disappointment over the proposed reduction in research and development (R&D) expenses. "We are disappointed with the announcement of the R&D incentives reducing because we believe that it is critical for India to be one of the most innovative countries in the world and this move could be detrimental in building India as an innovation hub. I strongly urge the government to re-consider this move, as any restrictions on the R&D ecosystem are likely to decelerate innovation in the country and restrain the ambitious Make in India and Digital India vision", said Debjani Ghosh, President, MAIT.

ISODA termed the budget as balanced budget. The association said that the provisions in the budget and government’s focus on rural empowerment would facilitate the growth of other verticals like manufacturing, FMCG, Banking and Insurance etc. “We are expecting more spending for Corporate. Maintaining the status quo in most of the policy/Acts is welcome. Transparency in assessment is a good beginning. However, absolute clarity is missing on how ease of doing business with be achieved in this budget”, said L Ashok, President of ISODA.

“Union Budget 2016 overall lays thrust on agriculture, infrastructure, rural employment and social sector. From IT channel perspective, there is encouragement for IT hardware in Make in India initiative. The proposed increase in service tax to 16 percent is a pinch as most of the SOHO customers express concerns on such high rate of tax on receiving IT services”, said Saket Kapoor, General Secretary of  FAIITA.

“The budget has nothing exciting as far as the IT hardware is concerned. I hope the Startup India initiative will succeed and the tech sector will make most of it” said R Sridhar, owner of Bengaluru based Triangle Technologies.

“ There are no major changes for IT industry in this budget, Good think for surveillance and internet business DVR, CCTV camera and router became cheaper it will boost business in that segment. Positive move for Start Up will also help for new entrepreneurs. Overall its good Budget”, said Narendra Bheda, President of  CMDA Pune.

While most of the partners are not very happy with the announcement for the ICT industry in the budget, Rashi Peripherals said that the benefits would be visible in the long run. “With lesser Import Duties on raw materials for Notebook, Tablet and Desktop manufacturers, we are sure to have national players competing in the above mentioned industries”, said Suresh Pansari- Director, Rashi Peripherals.

Confed ITA pointed out that the finance minister totally ignored the OLS factor in the budget and did not specify guidelines for taxation of OLS businesses. “The union budget did not mention anything about the scenario of growth of online marketing with reported losses of huge amounts in their balance sheet. There is a lot of support for the manufactures for the initiation, but could not cover up anything about the retailers they are the back bone of Indian economy in the past years”, said Pratheesh Mathew, Joint Secretary II, Confed ITA.

“I feel budget is very popularism and no clarity for entrepreneurs and only focus on make in India. There has to be more clarity and definition for the current revenue streams” said Jiten Mehta, Director, Magnamious Systems.

Channel appreciated government’s vision regarding Startup India, Skilled India and Digital India. “The overall budget is good. It gives the example of "Slow & Study Wins the Race". A good opportunity for "Stand Up INDIA", "Start App" and also "Make In INDIA". Online education in village to develop "Digital India" will develop skill employees. Tax benefits for companies in the first three years will help to develop the company”, said Satyan Shah, owner of an Active System.

Disappointed to see no major announcement for the hardware and software industry, channel partners are still optimistic that the business will gain its momentum in next 3-4 years.