Budget disappoints IT sector

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No one had expected that the Budget 07-08 would be so disappointing for the IT and ITES sector. However, it was expected that IT sector would largely be neutral to the budget provisions. But in his budget speech, Finance Minister has sprung an unwelcome surprise by imposing MAT of 11.23% on book profits on this sector. Apart from that Government did not extend the Software Technology Park benefits beyond 2009 and also included ESOPs under the Fringe Benefit Tax which has further impacted the sector in the worst way.

However, there were few good news for this sector in the form of hike in education allocation by 34.2% to Rs32,352 crore which will impact the IT education companies like NIIT, Aptech and Educomp Solutions positively. Almost doubling of e-Governance outlay both at centre and state level might benefit companies like Vakrangee to major extent and TCS and other Government focused companies to some extent.

Reacting to these developments N Ramachandran, Member of the Board and CFO, iGATE Global Solutions said, "The budget is a disappointment for the IT sector as the Government has sprung an unwelcome surprise by imposing MAT of 11.23% on the sector which was given tax break till March 2009. The proposals to bring employee stock options under fringe benefit tax and increase in the dividend distribution tax is also regrettable."

Giving his views on the same, V Balakrishnan, CFO of Infosys says this will impact all companies, while some of the companies can get a set off too.  "Infosys' net margins will be impacted by 1.5% due to MAT," he says.

 

By Om Prakash Singh