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The FY 2016-17 budget is crucial for the IT/ITES and Engineering services industry. With this budget, The IT/ITeS industry expects announcements which may foster a better business environment and increase the ease of doing business in India. Senior industry people believe that the IT industry in the country has been facing several challenges due to lack of clarity in transfer pricing norms. “We are hopeful that the upcoming budget will address this and a few other essential elements like a correction in the prevailing high interest rates of 20-30% for safe harbor margins. Furthermore, the foreign trade policies should include benefits of Services Exports from India Scheme (SEIS) for Software Technology Parks of India (STPI) units. Currently, without such benefits, STPI units are at a disadvantage as compared with their SEZ counterparts for the same services,” stated BVR Mohan Reddy, Founder and Executive Chairman Cyient and Chairman of NASSCOM.
Mr Reddy further emphasized on expectations from the IT industry point making following points:
On Boosting the Manufacturing Sector:
The government should formulate better SEZ policies and incentives for the electronics manufacturing sector. India must make its R&D significantly more robust to realize the Make in India dream. The government should introduce suitable changes to address the inverted duty structure. The forthcoming budget should promote more R&D benefits so that organizations are encouraged to innovate and develop new technologies. Also considering the increasing level of threats due to cyber connectivity, the government needs to allocate a budget for the development of cyber security system.
On Startups
The government has announced many initiatives for encouraging start-ups. Due to Initiatives like Startup India Standup India there is a great momentum and enthusiasm amongst startups as well as investors. Startups are an important element of our economy and society today and rightly so. We have 7-8 unicorns in the country today, which was unheard of in the last decade. The revolutionary growth demonstrated by startups necessitates the government to take more initiatives to address the pressing challenges faced by this community. Initiatives are needed in the areas of facilitating ease of doing business to further boost startups. Tax exemption on direct and indirect taxes including MAT, where start-ups lose a big chunk of cash flows is the need of the hour. This will reduce compliance burden and reduce cash outflows. The government should further make a proposition to bring capital availability at seed level for startups. In the recent years, a pool of angel investors have emerged who are helping these startups work on new ideas. The FY 2016-17 budget has to encourage them by waiving off tax on capital gain, and should also allow carrying forward of losses even if there is a change in ownership structure, if it is for capital infusion in the entity.
On the economy, state and Hyderabad
The government should allocate some funds for the development of the new state, especially to improve agriculture sector. Infrastructural incentives for Telangana will be a welcome move. The state needs support in terms of incentives for the large-scale projects planned such as the proposed PharmaCity. Declaration of the Pharma City under National Manufacturing Zone is a great initiative, but the industry needs more support in the areas of R&D. The education system in the state needs to be enhanced. While the industry is doing its bit for enriching the education system, the government should further allocate a budget for standardization of education in the state.
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