Channel not very impressed with the budget

New Delhi

March 7th, 2008

The much hyped 2008 budget has had almost a negligible affect on the IT
channel partners. While the reduction in excise duty from 16 to 14 percent has
been welcomed by them, the partners are of the view that it could have been as
low as 12percent to further give impetus to their business. They also indicated
that exempting certain raw materials used in IT hardware products from custom
duty is a smart move taken by the government. However, since the exemption has
been made for the set top boxes and other related communication products only,
the partners also suggested that it would not impact their business directly.
Besides implementing service tax on customized software has left the channel
wondering.

Saket Kapur, CEO of Delhi based Green Vision opined that the budget is well
suited for the farmers and the IT industry has nothing as such to look forward
in it. "Packaged software has become more expensive and this is not a good
sign for our business. Besides, service tax has been implemented on customized
software and it has now becomes 12.6 per cent more expensive," he added.

"Certain raw materials used in the IT hardware manufacturing have been
exempted from custom duty and this is a good sign for the importers and people
looking to manufacture IT products in the country. However in India companies
have to adhere to several compliance issues and the government should look in
this direction to help improve the situation. The other good point about the
budget is that excise duty has been reduced from 16 to 14 percent and this will
affect our business positively," he added.

Ajay Kumar, CEO, Delhi Park Electronics, another channel partner, said,
"Exemption of custom duty on certain raw materials used in IT hardware is a
clear indication from the government that it wants to encourage manufacturing in
India. However the budget does not have much for the IT industry."

"Hiking excise duty on packaged software is not at all a welcome sign
from the government and this will affect the IT industry to a considerable
extent. However exemption from custom duty on certain raw materials with regard
to IT hardware products implies that the sale of PCs will increase alongside
giving impetus to manufacturing within the country," said JP Modi, CEO, of
Delhi Modi Peripherals.

Rajeev Khanna, president, Jalandhar Computer Dealer's Association, said,
"We had always wanted that besides exemption in custom duty the government
also reduces the excise duty and the proposal to reduce excise duty from 16 to
14 percent will help us expand our business further."

"Exempting certain raw materials used in hardware products from custom
duty will affect our business positively besides encouraging manufacturing of IT
products, something that the industry was looking forward to. This also implies
more business for us as the penetration of laptops and desktops will witness an
increase further. The excise duty has been reduced from 16 to 14 percent, though
we were expecting it to come down to 12 percent, and this is a smart move by the
government," added Jayesh Mehta, President of the IT Association in
Karnataka.

P.N.Prasad, Microplus computers, Pondichery stated, "No new developments
have taken place after this union budget. There has been no special benefit for
the IT to create more hype about the same. In another aspect the service tax
would cut down the benefit of the partners and the exemption of duty on Hardware
products will not affect our business significantly."

A different view

While suggesting that the hike on packaged software was not necessary, Atul
Shah of Pune based Atson Infotech had other points to indicate as well. "Octroi
is an issue in our region and the government should have given us exemptions on
CST (Central Sales Tax) as well."

Dileep Mehta of CEO of Mumbai based VR Infotech stated that the government
should have done something with regard to duty based MRP on the IT products and
exempted the IT dealers from it. He further opined that exempting certain IT
hardware items from custom duty was a good sign but again it did not affect
their business much as these raw materials were basically used in communication
products. "All the government is trying to do is support the mall culture
and multinationals, there is nothing for the small traders in the budget. CST is
a major concern and we end up paying additional tax every time we import the
products but nothing has been done on this front," he mentioned.

Said Gaurav Goyal of Eastern Logica, Kolkata "This is a normal budget
and has nothing unusual about it. Hike in packaged software was registered only
because the volumes in this domain has increased and the government wanted it's
share of revenues."

P.K.Harikrishna of All Time Power Technologies, Cochin, mentioned,
"There has been service tax for packaged softwares earlier too. But now
they have increased that from 8 to 12 percent, which will worsen the situation
further. Customers usually look for cheaper products and thus tend to buy
pirated softwares. This move will encourage the business of pirated software
further."