The software industry faces the heat

"The software industry has to mature in five years’ time. So I am not against the finance minister’s proposal to tax 10 per cent income from software exports," says Polaris Software CMD Arun Jain. "The industry should not crib much about this."

But his is the only voice that sounds optimistic about the budget proposals. Says Cognizant Technology Solutions president and COO N Lakshmi Narayanan: "There has not been anything positive for the IT industry at large and for software in specific. The introduction of corporate income tax to the tune of 10 per cent of the income will greatly impact the small to medium IT companies. This will also have a debilitating impact on generating higher employment opportunities in the IT sector."

"There has been a half-hearted approach to the IT industry in terms of giving it a further fillip. Barring the 10-per cent reduction in customs duty for setting up earth stations and the mild concession for hardware and IT products, there is nothing noteworthy for the IT sector. The expectations on procedural simplifications in the areas of customs bonding, softex forms and withholding tax have not been addressed. Likewise, there has not been a bold move to help the IT industry to use the Exchange Earners Foreign Currency Account (EEFC) effectively," he says.

Says Laser Soft Infosystems chairman B Suresh Kamath: "Indian professionals have greater talents in the development of world-class software products. With the present global IT slowdown, India has to move over to developing products, which would fetch export earnings in the long run. Presently, Indian professionals associate themselves with the products developed by various foreign countries and these products are sold to India back in dollar terms. The government should encourage ‘product development’ and support the companies that cater to the domestic market."

While export-focussed IT companies enjoy tax benefits, the domestic market-focussed software companies suffer taxes. This naturally made their services costly, and the domestic industry and the government did not embrace IT enthusiastically. "It should be noted that China is pushing IT in the domestic market in a significant way," says Jain.

Rounding up his views on the budget, Jain says: "I was expecting something else. After losing all the state assembly elections recently, the central government lost an opportunity to take bold measures. This was the ripe time for a bold budget. But it turned out to be like a housewife’s budget — 5 per cent here, 2 per cent there, and 10 per cent somewhere else."