Budget 2012-13: Not good for telecom

In budget 2012-13, the service tax has been raised from 10 percent to 12 percent. Mukherjee said that this increase is expected to yield an additional revenue of Rs 18,600 crore. The increase in service tax will lead to making the services costlier and affecting profitability of companies.

“Increase in service tax from 10-12 percent would increase cost of ownership of a mobile phone. This becomes all the more significant for CDMA based mobile services which to a large extent services the telecom needs of customers who are at the bottom of the pyramid.," comments Vsevolod Rozanov, President and CEO MTS India.

GST network (GSTN) will become operational by August, 2012 and GSTN will implement common PAN-based registration, returns filing, and payment processing for all states on a shared platform.

Naresh Wadhwa, president and country manager, Cisco India & SAARC explains,"On the industry front, setting up Rs 5,000 crore venture fund for MSME sector is a welcome move, given that SMEs employ a sizeable population. We are also hoping that the GST roll out is on track for August this year."

"In terms of tax reforms, the proposals for 2012-13 mark progress in the direction of movement towards DTC and GST which will bring about uniformity in taxation. The cascading effect of dividend distribution tax has been removed; benefitting Indian MNC with operations in other parts of the world, "comments Minakshi Batra, director India, IDA Ireland.

In terms of disnvestment, the government plans to raise Rs 30,000 crore through disinvestment from Rs 14,000 crore achieved in 2011-12. We can expect some disinvestment from telecom vertical also.

Pranab Mukherjee's budget 2012-13 addresses five objectives-- focus on domestic demand driven growth recovery; create conditions for rapid revival of high growth in private investment; address supply bottlenecks in agriculture, energy and tansport sectors, particularly in coal, power, national highways, railways and civil aviation.

The budget is expected to increase India's GDP growth to 7.6 percent in 2012-13 from 6.9 percent in 2011-12.

In 2010-11, the fiscal balance has detiorated due to slippage in direct tax revenue and increased subsidies. The government is planning to fund subsidies to the extent that they can be borne by the economy without any adverse implications said Pranab Mukherjee, union finance minister, government of India.

Pradeep Jain, MD, Karbonn Mobiles says,"Its a welcome move that the exemption of mobile phone parts from basic custom duties which while bringing down the manufacturing cost of mobile phones will aid in deeper penetration of mobile phone manufacturers into the untapped portions of the Indian market." We welcome the Finance Minister’s move to cut customs duty on memory cards for mobile phones, he added.

To decrease subsidies, the government will be dependent on Aadhaar in a big way be it fertilizer, kerosene, and LPG subsidy.

Rajesh Janey, president, EMC India & SAARC says,“The decision to increase investment in Aadhar and leverage technology more in larger service delivery initiatives will also provide impetus to the domestic IT sector.”

Our effort now will be directed towards better targeting and leakage proof delivery of the subsidies he added. Shri Mukherjee announced government's focus on leakage proof delivery of subsidies in wake of which; a mobile-based Fertilizer Management System,designed to provide end-to-end information on movement of fertilizers and subsidies will be rolled out nation-wide during 2012.

"Some of the key areas of concern for the industry, like skills development have not received any major focus," insists Partha Iyengar, vice president, Distinguished Analyst, Regional Research Director, India.