Update 32: (March 1, 2.21 PM)
Salora International Ltd feels very disappointed with the increase in duty of mobile phones. This will make grey market stronger and also act as dampener to further investment in manufacturing. Also there has been no proposal to curb unabated import of flat panel TV as personal baggage.
Update 31: (March 1, 2.01 PM)
Tata Communications feels that though the Union Budget 2013-14 did not have much focus on the Telecom sector in particular but the overall budget will be good for investments. There has been a meaningful increase in planned expenditure to the tune of 30%. This year the FM has put out a 4.8% fiscal deficit compared to 5.2% of last year. However, they see that an increase in government support to the industrial corridors will help growth and see a lot of foreign investment over the course of this financial year. They also feel positive about the commitment to having an ATM in every PSU bank branch by March 31st 2014 as it will provide a huge thrust to ATM network reach, penetration and adoption in India.
S Mobility feels that the handsets industry is facing difficult times with increased competition and price wars at large. With the proposed increase in tax for handsets above Rs.2,000, they do not see a decrease in demand but definitely, there will be pressure on the margins. This decision will surely impact the industry’s focus on making smartphones more affordable. At the same time, rural areas might get that much more difficult for smartphones to penetrate.
Manufacturers’ Association for Information Technology feels that though the Government has announced the National Manufacturing Policy that aims to increase the share of manufacturing in GDP to 25% within a decade, the budget has failed to reverse the inverted tax structure which has been impacting the industry for years now, making India a predominantly import dependent country. They welcome the move to give additional depreciation but the inverted duty structure and lack of demand would reduce the incentive for many companies to take advantage of this provision.
Update 30: (March 1, 1.53 PM)
Take a look at what the budget 2013-14 holds for the digital businesses, giving you sector-wise analysis and impact of the budget.
Update 29: (March 1, 11.37 AM)
Myntra welcomes the progressive move taken by the finance ministry to plug the current account deficit and focus on foreign investments as a viable measure. Assured investments in infrastructure and connectivity of rural areas will further boost our economy and provide scope for the ecommerce sector to expand its services to all corners of the country.
getitBazaar.com feels that the move by the Finance Minister to enhance the refinancing capability of SIDBI from the current level of 5,000 crore to 10,000 crore per year is likely to encourage new entrepreneurs to set up their own businesses. This move will also result into generation of more employment opportunities.
Reliance Broadcast Network Ltd feel that the budget brings good news for the radio industry, with phase III poised to create optimal reach for the medium. Other benefits like news, networking, current affairs and sports, multiple frequencies etc. will add the necessary fillip to further fuel listenership growth through reach and content diversification and will also drive profitability and revenue through cost optimization. They also believe that with deeper penetration, radio can play a key role as a catalyst of social transformation through partnership for CSR initiatives, social causes and Government initiatives, as it reaches where no other medium can because of literacy and cost issues. With expansion to 300+ cities, it stands to reach 90% of the Indian population.
Update 28: (Feb 28, 4.40PM)
Broadcasting: Government proposes to expand private FM radio services to 294 more cities. About 839 new FM radio channels will be auctioned in 2013-14 and, after the auction, all cities having a population of more than 100,000 will be covered by private FM radio services.
Postal service to become part of Core Banking & Real time Banking: Government has initiated an ambitious IT driven project to modernise the postal network at a cost of `4,909 crore. Post offices will become part of the core banking solution and offer real time banking services. I propose to provide Rs.532 crore for the project in 2013-14.
Income Tax: A surcharge of 10 percent on persons whose taxable income exceeds `1 crore per year. This will apply to individuals, HUFs, firms and entities with similar tax status
Update 27: (Feb 28, 4.30PM)
Some of the reactions to the budget:
Alok Kejriwal’s (Games2Win) reaction to the budget on his Facebook profile along with reactions to the status message:
IndiaMART.com sees the current budget as definite positive one for the MSME community. By increase the budgetary support for SIDBI (Small Industries Development Bank of India) for Micro Finance Equity Fund by 100 cr, he believes that the Finance Minister has ensured that the financing needs of MSMEs are taken into consideration and they are able to growth at an optimum pace.
PwC India sees this budget as a response to the prevailing socio-economic circumstances in the country. They believe the Finance Minister has put forward a peoples’ budget. The most reassuring aspect of the budget today is the Finance Minister’s acknowledgement of the critical need for continued inflow of foreign investments for augmenting the country’s growth. The focus is clearly on the imperative of maintaining a healthy environment to mobilise it. They believe that the Finance Minister has also done well to place continued emphasis on the infrastructure sector, particularly, social infrastructure, which is really the need of the hour.
Winjit Apps’ don’t consider this budget as exciting. They believe that though the FM has said that he would like to make things easier to do business, Winjit Apps cannot see any steps done towards it. Instead, it appears to them new forms of Taxation have been imposed. Import Duties on phones has been increased and certainly which will hit the app ecosystem indirectly. They were hoping there would be something for IT in the SMB segment, but it seems they have been disappointed again. They believe that the FM had to be more innovative and done something out of the box rather than conventional means. India needs radical changes to make it works for the app ecosystem.
Update 26: (Feb 28, 4.16pm)
Proposed changes in the capital market:
- Designated depository participants free to register investors: Designated depository participants,authorised by SEBI, will now be free to register different classes of portfolio investors, subject to compliance with KYC guidelines.
- Simplified registration for foreign investors: SEBI will simplify the procedures and prescribe uniform registration and other norms for entry of foreign portfolio investors. SEBI will17 converge the different KYC norms and adopt a risk-based approach to KYC to make it easier for foreign investors such as central banks, sovereign wealth funds, university funds, pension funds etc. to invest in India.
- <10% stake = FII and > 10% stake = FDI: In order to remove the ambiguity that prevails on what is Foreign Direct Investment (FDI) and what is Foreign Institutional Investment (FII), I propose to follow the international practice and lay down a broad principle that, where an investor has a stake of 10 percent or less in a company, it will be treated as FII and, where an investor has a stake of more than 10 percent, it will be treated as FDI. A committee will be constituted to examine the application of the principle and to work out the details expeditiously.
- Angel Funds recognised as Category I AIF: SEBI will prescribe requirements for angel investor pools by which they can be recognised as Category I AIF venture capital funds.
- SMEs permit to list on SME exchange without IPO: Small and medium enterprises, including start-up companies, will be permitted to list on the SME exchange without being required to make an initial public offer (IPO), but the issue will be restricted to informed investors. This will be in addition to the existing SME platform in which listing can be done through an IPO and with wider investor participation.
Update 25: (Feb 28, 3.53pm)
- Non-tax benefits to MSME for 3 years: I propose that the non-tax benefits may be made available to a MSME unit for three years after it graduates to a higher category.
- Refinancing MSME: To provide greater support to MSMEs, I propose to enhance the refinancing capability of SIDBI from the current level of `5,000 crore to `10,000 crore per year.
- Funds to Tech incubators to become CSR expenditure: The new Companies Bill obliges companies to spend 2 percent of average net profits under Corporate Social Responsibility (CSR). I am glad to announce that the Ministry of Corporate Affairs will notify that funds provided to technology incubators located within academic institutions and approved by the Ministry of Science and Technology or Ministry of MSME will qualify as CSR expenditure
- Changes in Foreign Trade Policy: Likely to be out next month.
- All branches move to CBS and e-payment services by 31.12.13: All scheduled commercialbanks and all RRBs are on core banking solution (CBS) and on the electronic payment systems (NEFT and RTGS). We are working with RBI and NABARD to bring all other banks, including some cooperative banks, on CBS and e-payment systems by 31.12.2013. Public sector banks have assured me that all their branches will have an ATM in place by 31.3.2014.
Update 24: (Feb 28, 15.02)
More extracts from Finance Minister’s Budget speech this morning:
- This year, and perhaps next year too, we have to find over USD 75 billion to finance the Current Account Deficit. There are only three ways before us: FDI, FII or External Commercial Borrowing (ECB). That is why I have been at pains to state over and over again that India, at the present juncture, does not have the choice between welcoming and spurning foreign investment. If I may be frank, foreign investment is an imperative.
- The 12th Plan projects an investment of USD 1 trillion or `55,00,000 crore in infrastructure. The Plan envisages that the private sector will share 47 percent of the investment.
Update 23: (Feb 28 2.41PM)
Reaction to the provision for startups to list in SME platform without an IPO
End of budget speech. We shall soon update with other points from the budget that may have been left out during the speech.
Update 22 12.41pm: Mobile phones enjoy consessional excise duty of 1%. Price of mobile more than 2000 – increase to 6% excise duty. Smart phones to cost more.
Update 21: 12.37pm
Import duty from 5% to 10% to encourage domestic manufacture of set top boxes.
Update 20: 12.36pm
e-filing mandatory for more categories of SSE
Update 19: 12.35pm
No changes in customs duties, or service tax in non-agricultural sectors
Update 18: 12.34pm
Extend e-payment through more banks
Update 17: 12.33pm
Tax rate for payment under Royalties and Fee for technical services to Non-residents to be increased from 10% to 25% to align them with DTAA rates
Update 16: 12. 32pm
Withholding tax of 20% on distribution of profits by way of buy back.
Update by Pallav Narang from Arkay&Arkay
Update 15: 12.31pm
All public sector bank branches and co-operative banks to be converted to CBS by the end of the year with budget allocation of
Update 14: 12.28pm
Foreign Investments above 10% to be considered FDI, all investments below the threshold to be considered FII
update by Pallav Narang from Arkay&Arkay
Update 13: 12.26
294 radio licenses to be auctioned by 2014. Cities with certain population limit will all have private radio stations.
Update 12: 12.23pm
Startups will be allowed to list in SME platform without an IPO
Update 11: 12. 15pm
SEBI will simplify procedures for entry of foreign portfolio investors to invest in India
Update 10: 12.00pm
SEBI will create regulations for angel investors to make them AIF
Update 9: (Feb 28, 11.49AM)
Funds provided to tech incubators to be included in the mandatory 2% CSR expense under the new companies bill. This should be great news for start-ups.
Update by by Pallav Narang from Arkay&Arkay
Update 8: (Feb 28, 11.44AM)
Live updates from the budget:
Many sops for Infrastructure sector, will have a trickle down effect on other ancillary sectors.
Update by Pallav Narang from Arkay&Arkay
Update 7: (Feb 28, 7.30 AM)
Here’s a quick recap of Budget 2012-13 and its impact on the different segments of the digital media industry by Pallav Narang from Arkay&Arkay
Barring the earth shattering move on Retrospective taxation which was more focused on telecom companies rather than the telecom sector per se, we saw only minor relaxations with respect to service tax. There was almost nothing focused on fostering the telecom sector in the budget of 2012.
One of the changes that had impact was the change in the term “Royalty” which was amended to include Transfer of right to use ( including license) computer software Consideration in respect of any right, property or information and “Process” which was deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down linking of any signal), cable, optic fibre or by any other similar technology. Therefore subjecting payments for these to withholding taxes.
Internet and mobile advertising were exempted from the service tax net by way of inclusion of the services in the negative list regime of taxation as introduced by the finance minster in the union budget 2012. This was primarily concerned with the revenues from sale of space for advertising leading to lower costs for advertisers and lower cost of compliance for the service providers.
Investors and Start-ups
The budget introduced clauses whereby Consideration received by a private company or unlisted public company for shares, in excess of the Fair Market Value (“FMV”) of such shares was be considered incomes in the hands of the company and chargeable to tax as “income from other sources”. This so called start-up tax led to widespread panic as all investment above the FMV would have been subjected to income tax at the rate of 30% depriving a start-up of resources. The government has since amended this to exclude Registered Venture capital funds and angel investors from these provisions.
The budget also introduced a clause where long term capital gain arising from sale of residential property will be exempt if invested in an eligible company and then used by such company to acquire new assets, this would have ostensibly encouraged entrepreneurship but so far we have seen almost no impact. Under the current economic conditions not many people are willing to sell property to invest in companies.
Update 6: (Feb 28, 6.25AM)
Today’s budget speech by the Finance Minister at 11AM will be covered live by many websites including iStream, money control’s MYTV, ET NOW and NDTV.com. The Indian Government will also be live streaming the Union Budget speech here. Medianama will also be covering the union budget live for the digital media industry.
Interestingly, for the first time, the Finance Minister will engage online on Google+ hangout and Youtube on March 4, 2013 at 8:00 p.m. IST to answer questions pertaining to the Union Budget. People can ask questions by submitting a video or text question using the hashtag #askthefm. Questions can be posed even on Youtube by submitting a video or posting a comment.
Google India blog says that the Finance Minister will be joined by Jahangir Aziz, Senior Asia Economist and India Chief Economist, JP Morgan, Anand Mahindra, Chairman and Managing Director of Mahindra & Mahindra, and Amit Singhal, Senior Vice President, Google Inc.
Update 5: (Feb 27, 12.10PM)
Budget expectations continue:
Myntra: Myntra expects the budget to introduce business friendly tax measures and implement GST which will provide strong opportunities for growth across sectors. They also expect the budget to be be more progressive, boost infrastructure, especially in Tier 2 & 3 cities to make India a more attractive destination for large foreign investment.
Winjitapps.Info: Winjitapps is hoping that the budget will provide a more aggressive investment policy to support App and Software developers. Banks in India fund marketing and development if companies have collateral security. Some of the other problems that they cite with respect to app funding are that the risk fund is not so easily available and if available is very expensive. They believe that if taxation and other incentive policies are available for SMB investors to invest in this space, it is likely to create a more vibrant ecosystem.
Update 4: (Feb 26, 6.00PM)
Faking News has published a story with a satirical take on the proposed Wi-Fi networks in the railway budget that was announced today.
Read it here.
Update 3: (Feb 26, 3.30PM)
Business Standard has a published a three part video on what goes into the making of the Union budget every year.
Update 2: (Feb 26, 1.30 PM)
Here are some major announcements from the Railway Budget 2013, related to Internet and Digital sectors:
- The availability of Internet ticketing facility has now been extended from 0030 hours to 2330 hours.
- The ministry plans to allow e-ticketing via mobile phones (Note: We are not sure what the ministry means by this statement, since IRCTC already offers a mobile site. Also it allows users to book tickets through Paymate, ngpay and atom mobile applications. That being said, IRCTC had previously stated plans to launch a mobile application)
- A SMS alerts project is being rolled out which will provide passengers with updates on reservation status.
- The Real Time Information System (RTIS) which offers real-time train tracking to passengers will be extended to a larger number of trains.
- The ministry is also looking to use the Aadhaar system to offer user services like ticket booking and validation of genuine passengers through GPS enabled handheld gadgets among others and provide a better interface for employees with respect to salary payment, pension, and allowances among others.
- Next-Gen E-Ticketing System: The ministry announced a next generation e-ticketing system to improve the existing Internet rail ticketing system. The railway minister claimed that the new system will be able to support 7,200 tickets per minute as against the present number of 2,000 tickets per minute. It will also be able to support 1,20,000 simultaneous users at any point in time against the present capacity of 40,000 users, with capabilities to scale up to 10X increased demand in the future. The system will also include fraud control and security to ensure transparency and safety.
- A pilot project is being launched on select trains wherein passengers will be able to contact onboard staff through SMS, voice or e-mail for prompt response for coach cleanliness and to provide real time feedback
- A free Wi-Fi facility has been planned on select trains. As Sachin Kalbag points out on Twitter, this plan has been around since 2003
@duak The first time it was done was in 2003. I still remember commissioning a story for Digit. In fact, Intel was the infra partner.
— Sachin Kalbag (@SachinKalbag) February 26, 2013
Update 1 (February 26, 10.30 AM)
The General Budget for 2013-14 will be announced on February 28, 2013. We will be reporting the telecom and digital media components live. In the mean time, we will also be giving you live updates on the budget expectations of digital businesses in the upcoming budget.
If you are a digital business and are keen to share your budget expectation with us, contact Brindaa at brindaa@mediana
Quick Heal Technologies: Quick Heal Technologies is expecting the Union Budget for 2013-14 to incorporate policies and measures to develop the domestic software industry and also focus on encouraging software products segment in the country by protecting it from foreign competition in the domestic market. He also asked that the government should promote Indian software products to develop more Intellectual Property for India.
IndiaMart.com: Indiamart.com wishes for the upcoming budget to have policies that can influence banks to give priority lending to MSMEs enabling financial push at various phases. Since a majority of businesses are Micro and unorganized they face a challenge in getting financial support from banks even though they fall under priority lending sector. In addition, Indiamart sees it important to have measures introduced to implement schemes like CGTMSE (Credit Guarantee Fund Trust for Small and Medium Enterprise) in a more effective manner with special thrust on actual disbursement of these funds. Read more on Indiafoline.com
Religare Capital Markets: Religare Capital Markets expects any changes in the duties on telecom equipment such as data cards, phones etc. would have minimal impact on the sector. It expects increase in service tax could negatively impact the sector and could impact the ARPUs of the operators. Read more on IRIS
getitBazaar.com: getitBazaar.com hopes that the Budget this year brings in policies and taxation schemes which benefits the e-commerce sector and SMEs. The companies sees the implementation of the comprehensive GST will indeed prove to be an important tax reform for the ecommerce sector. After the implementation of GST, the company feels that the sector will be able to pass on the benefits in terms of savings on products to customers and that will promote growth in this sector. For a lack of efficient and cheap logistics, getitBazaar wants the government to invest in infrastructure and enable easy, efficient, reliable connectivity within India.
Ogone Asia and EBS: It is not only the responsibility of the government and its policy initiatives but also the responsibility of every member in the process chain of the e-commerce business such as merchants, payment gateways and customers to work in harmony to shape up the industry’s future. Read more on Economic Times.
Gram Vaani: There has been a lot of talk about the National Innovation Council supporting startups, but haven’t seen much movement. Gram Vaani is hoping for the Government to make it easier for small companies and startups to run projects with the government. These companies are not able to connect into the system easily because there are typically long drawn tendering processes and reluctance to any change within government departments. They also hope that tax breaks are offered to enterprises/organizations to work with startups to try out PoCs in a scaled up manner.