Budget Reaction: PwC

“Unexpectedly, the budget did not offer fresh incentives for the Technology sector. However, there are a few positives for the sector.

Proposals like modernisation of the postal network which includes post offices becoming part of the core banking solution and offer real time banking services and the plan for national roll out of Aadhaar based schemes like the Direct Benefit Transfer (DBT) scheme will hopefully result in increased domestic IT spending.

To promote the manufacturing of electronic goods in India, the budget’s proposal to provide incentives to semi-conductor wafer fab manufacturing facilities including zero customs duty for plant and machinery is a welcome move.

The announcement made by the FM as regard issuance of clarificatory circular covering Development Centres and issuance of rules on Safe Harbour post receipt of report from the Rangachary Committee is a welcome move to bring about the much needed certainty in tax administration, which was also emphasised by the FM in his opening remarks in the Budget Speech.

Further, there are certain common matters which have a bearing on the technology sector as well. One is the increase in tax rates for ‘Royalty’ and ‘Fee for Technical Services’ to 25%. This could add to the cost of doing business and in net-of-tax contracts, the tax rate could be as high as 37.057%. Further, as a measure to curb tax avoidance, in case of buy-back of shares by unlisted entities, a tax of 20% has been introduced on the consideration paid in excess of sum received by the company at the time of issue of such shares.”

— Sanjay Dhawan, Technology Leader, PwC India

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