Venture fund, IT and auto sectors thumb-down the budget

28 Feb 2007

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Chennai: The government''s proposal to specify industries that are eligible for pass- through benefit in the case of venture capital investments has irked the venture capitalists.

Says R Ramraj, "The venture capital industry in India is at a nascent stage. It is not right to dictate where passthrough facility is available and where not." According to him, lot of venture capital investment has gone into internet related businesses. "Internet ventures are not in the list of industries mentioned by the finance minister in his budget speech."

The union finance minister had mentioned information technology, bio-technology, nano technology, seed research, new product development in pharma sector, bio fuels and dairy industry.

Adds Raju Vegesna, chairman and CEO, Sify Limited, "It is a little disappointing to see that, despite the need to ensure more citizens have access to the Internet to participate in e-governance, cyber cafes and Internet access services have not been made exempt from service tax. Such a measure would have given a boost to the government''s efforts to rapidly increase Internet penetration and use, as well as contributed to the success of the e-governance services being rolled out."

According to Gowri Shankar Subramanian, CEO, Aspire Systems, "Corporate India does not have much to rejoice with ESOPs coming under the fringe benefit tax net. ESOPs is an integral part of the employee retention strategy. Further for the software industry, there s no mention on the status of the 10A exemption beyond 2009."

In addition the extension of minimum alternate tax would affect some IT companies.

The IT hardware sector is happy with some of the budget proposals. Says Vinnie Mehta, executive director, Manufacturers'' Association for Information and Technology (MAIT) said, "We welcome the increase in budgetary allocation for e-governance at the centre by 82 per cent to Rs719 crore, and to state governments by 66 per cent to Rs500 crore, in addition to the move to computerise the public distribution system (PDS) and the Food Corporation of India (FCI). These steps will provide further impetus to the industry."

According to deputy managing director, Toyota Kirloskar Motor, K K Swamy, the union budget 2007-08 is disappointing for the automobile industry. "The request of 16 per cent uniform excise duty for all passenger vehicles has not been met. Hence the market distortion in the sector would continue."

According to him the reduction in customs duty peak rate from 12.5 per cent to 10 per cent would help in maintaining competitiveness. The other step in right direction he said is the reduction of central sales tax by 1 per cent to 3 per cent. "However this would get neutralised to an extent due to the additional educational cess."

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