• Surfing and Viewing agriculture information for an hour will cost Rs 10. Thats what most cyber cafes’ charge, where is the subsidy or why charge at all?
• Printing per page will cost Rs 2, as high, if not more, than some cybercafes.
• Viewing video uing CD will cost farmers Rs 10 per hour and requesting for online Soil Health Card will cost Rs 5.
• Sending five questions through net will attract a fee of Rs 5
• We’re not sure of what this means, but “sending a one sentence query will cost Rs 2.”

Several CSCs Not Functional Anymore; SWAN, e-Districts Behind Schedule

What’s really not funny is this statement that the Government is trying to ensure that there’s telecom and broadband in every village: the CSC rollout appears to be faltering: As of February 28, 2010, 561 out of the 1159 Common Service Centres are still non-operational in Haryana. The CSCs have been non-functional from January. Similarly due to cancellation of contract 133 CSCS are non operational in Tripura.

Out of the 14 states for the e-district project, work is on schedule only in Assam but data digitization is still in progress and a state wide rollout is yet to take off. For the remaining 13 work is behind schedule or in progress at various phases.

Only 2 states Chhattisgarh and Uttar Pradesh have completed the State Wide Area Network (SWAN) implementation since the end of January taking the total to 17. Implementation in Assam, Bihar, Maharashtra and Orissa are behind the deadline.

Progress:

A total of 71,078 CSCs have been rolled out in 28 States out of the total 122,981. 27,376 online monitoring tool has been installed across 24 states. In Punjab the bid process is underway, MSA signing is pending at state level for Arunachal Pradesh, Request For Proposal / Tender (RFP) is  ready for issuance in Nadaman & Nicobar and implementation in Lakshwadeep, Daman & Diu and Darda & Nagar Haveli are under discussion.

In 2008-09, a total fund of Rs 560.46 million  and Rs 231.75 million has been issued by the Department of Information Technology (DIT) and as Additional Central Allocation (ACA) respectively for the CSC implementation. CSCs are Internet connected kiosks set up in villages that allow citizens to book tickets, apply for jobs, search for market information on crops and sell their produce. The CSC rollout is a part of the National Rural Employment Guarantee Plan(NREGA).

DIT has released funds worth Rs 570.8 million  and Rs 520.8 million has been released as ACA for SWAN implementation .

There seems to be some progress in the SDC implementation. A total of 7 states have contracts signed and work orders issued, an addition of 4 namely, Maharashtra, Sikkim, Nagaland and Rajasthan since mid January. These states have a deadline of July to August 2010 for implementation.  A total of Rs 407.9 million  and Rs 1.2 billion has been released by DIT and ACA respectively for the project.

Download:

Related:

–694 CSCs Non Operational, 8 States Get SWANs
–Lack Of Funds Stalls National E-Governance Projects
–India Adds 12.05M Connections In June; E-Governance Roll Outs Delayed
–Internet CSC Rollout Complete In Jharkhand, Haryana, Sikkim; Long Way To Go

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Earlier (Feb 26th): The 3G Auction notice announced yesterday paints an abstract picture of the future: for some reason, the government has indicated that metros Delhi, Mumbai, Class A circles such as Andhra Pradesh, Gujarat, Karnataka, Tamil Nadu and Maharashtra shall get only three 3G operators while selected Class B and C circles such as Punjab, West Bengal, Himachal Pradesh, Bihar and Jammu and Kashmir get four. Is this move to protect government owned telcos BSNL and MTNL? MTNL only operates in Delhi and Mumbai; both the telcos registered unexpectedly low 3G subscribers. In the first four months of BSNL launching 3G, it only registered 13,000 subscribers. MTNL too had to reduce rates for 3G after a poor start in the capital. Do read our post  MTNL Brings 3G Jadoo To Mumbai; Killer App; 3G A Revolution?

Spectrum auctioning for wireless broadband (BWA) is much neater – a consistent 2 operators per circle will be permitted.

Set to begin on April 9th, the auction of 3G spectrum in India will be preceded by a mock auction. For the timetable of events, read our earlier post. The spectrum under the hammer will be:

• 3G: 2.1GHz, paired up in blocks of 5MHz
• BWA: 2.3GHz, in blocks of 20MHz

Download: 3G & BWA Auction Notice Inviting Applications (PDF)

Two Stages: Clock & Frequency Identification

In the Clock stage, spectrum will be allocated simultaneously to the winning bidders of a spectrum block in each service area. Each operator can win only one block per service area.

In the Frequency Identification stage, frequencies will be automatically and randomly allocated by the Electronic Auction System to the winning bidders.

The outcomes of both stages will be announced simultaneously. BSNL and MTNL, who rolled out 3G services almost a year ago now, will have to match the Winning Bid amounts for the 3G spectrum as fees.

Foreign Operators Welcome

The notice states that interested foreign entities will be permitted to participate in the auctions. They may obtain a licence subsequently, either through application for a new licence or through an acquisition of an existing licensee, which will be subject to the country’s M&A guidelines. The government unhesitatingly reveals that this may take “considerable time”.

The notice also has roll out obligations for operators; a fine of 2.5% of the spectrum auction price will be charged if these are not met.

Spectrum Usage Charges

The government intends to collect a percentage of their Adjusted Gross Revenue from the successful bidders every quarterly ranging from 3-8 percent. For BWA bidders, this is only 1 percent.

Is India set for 3G? While the DoT has attempted to ensure that critical infrastructure and competitive factors to ensure uptake of 3G are ensured, users will still need a whole new range of 3G handsets and applications.

Related

- India’s 3G Auction On 9th April 2010; Here We Go Again
- Bharti Airtel’s CEO & JMD Manoj Kohli On 2G, Price Cuts, LTE, M&A, Rural Content
- Editorial: How Telecom Operators In India Should Approach 3G

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Who’s there?

E-commerce.

E-commerce, who? India does not care for you.

The Union Budget 2010 is setting up the government for some serious ridicule from the Indian Internet community if this Business Line report is true. It says that the new budget has proposed a 10% service tax on all downloads of paid software applications onto a mobile or a personal computer. Make that 10.3% tax because software created by “foreign suppliers” will be charged more under an irksome clause called ‘reverse charge principle’ and most of the software or the latest mobile apps we buy is developed by foreign companies.

Under this reverse charge clause, individual users will apparently have to register for the service tax provisions and file the statutory returns for every piece of software they buy online, even for personal use. To top it off, this is applicable for every individual purchase one makes. So if you wanted to upgrade your blog’s theme and bought one, you would automatically have to go through the process of registering and filing 10.3% service tax on it! And how will the government keep a track of every user in India who purchases software online? Mobile networks might be easier, but does the government really expect all of them to diligently register and file the service tax? Ridiculous.

The government is taxing all kinds of software you really need to use (and the groovy mobile app you just HAVE to have) and has ensured you dont get away with saving even a little on online purchases with this shameful anti-Internet move. In case a clarification was necessary, this move is not meant for free applications or software we download all the time – just the ones we pay for.

Will App Stores Lose Momentum?

Prices of all paid applications you download onto your mobile from app stores that are mushrooming – Airtel’s AppCentral, Idea Cellular’s Mobstore, Aircel’s upcoming app store, the ever-popular iTunes Store or Blackberry World India – are also going to get the 10% service tax addition. This will push the buying decision of some users (even if by a fraction) to “not”, resulting in lesser participation and another hurdle for publishers and developers.

For all those with iPhones in India who thrive on the best app additions to the iTunes Store, our heart goes out to you.

PC Software & The Gray Market

Why did the government extend the rule to include mobile applications and software for home users? It does not make sense. Previously, only that software which was intended for commercial purposes – such as an organisation buying multiple licenses for employees – were taxed. Now, even home users – a user buying and downloading Adobe Photoshop so he can play around with his photo collection – should also be charged a service tax of 10.3% too. It is obvious that piracy will soar and the gray market will flourish like never before.

Software such as Microsoft Windows Vista OS, Adobe Photoshop, AVG AntiVirus, etc are classified as packaged/ boxed software and when retailed in India, their cost was inclusive of the service tax of 10%. But offering the same as a download was advantageous to both the software maker as well as the user – the maker saved on packaging costs (CDs/DVDs) and logistics, distribution while the user saved himself the walk to a store (or petrol ka kharcha) to buy the software. He could just click and download it (and contribute in a small way to the environment).

Since the maker saved on the distribution costs, the download price was lower and the user benefited from that too. But now, the government has proposed that the pricing should be the same, either way the user chooses to get the software. It would have even made sense if the government had authorised software publishers to include the service tax with the MRP for India – but putting the onus on users is nothing but a nuisance.  It is also a surefire way of telling the rest of the world that India’s e-commerce does not work.

The Business Line article states that ALL paid software will be charged the tax but does not mention if this includes online updates – such as a security update for an antivirus. What happens then?

It quotes a consultant as saying that “This amendment brought in with respect to information technology software services will create a lot of hardships.” Understatement of the year.

Related

- Budget 2010 Economic Survey: UID, Telecom, FDI, USO Fund, Prasar Bharati & e-Governance

- Indian Governments Job Portal To Take 22 Months After Approval

- Updated: Budget 2010: News Sites, Unique ID, GST, Gaming, Mobile, Banking

- Budget 2010: What The Digital Industry Wants

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UID: Coupon System

According to the Economic Survey, the Unique Identification project will assist a proposed coupon system for assisting the poor. The coupon system is a suggested alternative to the subsidy in essential food items like wheat etc, that at present is handed down to the poor through PDS stores.

The UID system will be complete by 2012. The UID is a project which aims at providing every resident of the country with a unique identification number.  The UIDAI will start issuing the IDs in 12-18 months time, and plans to cover 600 million people within four years from the start of the project.

Duty On Consumer Goods

According to the Economic Survey, basic customs duty on LCD panels for manufacture of LCD televisions was reduced from 10 percent to 5 percent and full exemption from 4 percent special CVD on parts for manufacture of mobile phones and accessories was reintroduced for one year, i.e. up to July 6, 2010.

Prasar Bharati’s Initiatives

The broadcaster has taken several steps to increase revenue through marketing and content improvement. It has introduced digital technology like Digital Terrestrial Transmission (DTT) and television on mobile and expansion of Direct to Home (DTH) service of DD-Direct+ to 97 free-to-air channels. Prasar Bharati will use high definition television technology for the coverage of the upcoming Commonwealth Games in Delhi. A budget of Rs 20.79 billion  was allocated in 2009-10 to cover up for the resource gap.

Banking For Farmers, Core Banking

A total of 87.83 million Kisan Credit Card was distributed as of November 30, 2009. In 2008-2009 the total number of branches of PSBs that implemented core banking has increased from 35,464 as on March 31, 2008 to 44,304 as on March 31, 2009.

FDI In Telecom

FDI inflow stood at $ 21.0 billion for the period April – September 2009 and was mainly channelled into manufacturing (21.4 per cent) followed by communication services (12.8 per cent) and the real estate sector (12.6 per cent).

The telecom sector received FDI worth Rs 108.11 billion for 2009-10 as compared to Rs 92.31 billion for 2008-09 and Rs 39.63 billion for 2007-08.
Acording to the survey India ranked among the first five countries in the export of computer and information services, commercial services, and communication services including telecommunications services.

Foreign direct investment (FDI) ceilings have been raised from 49 per cent to 74 per cent in telecom sector. For telecom equipment manufacturing and provision of IT-enabled services, 100 per cent FDI is permitted.

National e-Goverance Plan & Knowledge Network

According to the Economic Survey, 27 Mission Mode Projects were approved in May 2006. By December 2009, out of the 100,000 broadband Internet-enabled Common Service Centres (CSCs) planned to be rolled out in rural areas on PPP basis, 58,954 have been rolled out.

Eleven states and Union Territories have completed implementation of the State Wide Area Networks (SWANs) scheme which is expected to provide secured network from State headquarters up to block level with a minimum bandwidth capacity of 2 Mbps.

A total of Rs 13.79 billion has been approved for implementation of State Data Centres 27 States and Union Territories have completed the institutional framework for State-level strategic decision making including setting up of State e-Governance Mission Teams (SeMT) and deployed SeMT personnel.

A Knowledge Network consisting of 15 Points of Presence (PoPs) with 2.5 Gbp capacity with capability to connect 1000 nodes covering  universities, research institutions, libraries, laboratories, hospitals and agricultural institutions across the country, has been established. 57 institutions of higher learning have been connected to the network and six virtual classrooms hve been set up at six IITs.

Growth

With 525.1 million wireless connections as of December 2009, India has become the second largest wireless network in the world. Approximately 85 percent of the Eleventh Five Year Plan target of 600 million connections has been achieved at the halfway point. In 2003 there were only 54.6 million telephone connections in the country which has grown to 562.21 million as of December 2009.

Teledensity has increased from 12.7 percent in March 2006 to 37.0 percent in March 2009 and 47.9 percent in December 2009. Rural teledensity which was 1.2 percent .2 per cent in March 2002, increased to 9.5 per cent in March 2008 and further to 15.1 per cent in March 2009 and 21.2 per cent at the end of December 2009. Urban teledensity increased from 66.4 per cent in March 2008 to 88.8 per cent in March 2009 and stands at 110.7 per cent in December 2009.

In 2006 there were only 0.2 million broadband connections in India which has risen to 7.98 million by the end of December 2009. According to the survey the important challeng787e for broadband penetration is low PC penetration and affordability due to high cost. It further states that the government has issued guidelines for Broadband Wireless Access (BWA) which will enhance broadband penetration.

Read: Economic Survey 2010 – Full Text on The Hindu

Target

The 11th Five Year Plan targets providing broadband to all secondary and higher secondary schools, Public Health Care Centers and Gram Panchayats. It is also envisaged that internet and broadband subscribers will increase to 40 million and 20 million respectively by 2010. The survey also discusses the upcoming 3G telecom  service, the yet to be implemented Mobile Number Portability (MNP) and the introduction of the National Integrated Directory Service.

USO Fund Utilization:

Village Public Telephones (VPT), Rural Community Phones: About 5.7 lakh VPTs are currently eligible for financial support for operation and maintenance. As of December 31, 2009 BSNL has provided VPTs to 61,186 VPTs out of 62,302 uncovered villages. Out of the target of 40,705 RCPs, 40,694 have been provided till December.

Tower Infrastructure: The government has launched a scheme to provide support for setting up and managing 7,436 infrastructure sites spread over 500 districts in 27 states. About 6,956 towers have been set up under this scheme so far. BTSs are being commissioned and mobile service started in a phased manner.

MARR Based VPTs & Rural Direct Exchange Lines: Under the USO Fund, a total of 1,85,121 MARR (Multi Access Radio Relay) based VPTs, 1,84,521 have been replaced till December 31, 2009. As of December 31, 2009, about 7.05 million RDELs (Rural Direct Exchange Lines)  have been provided.

Rural Broadband: 95,011 broadband connections out of the proposed 8,88,832 wire-line broadband connections and four kiosks have been provided till December 2009.

Post Offices

Out of 25,531 departmental post offices, 12,604 have been computerized and 1,304 post offices have been networked through leased line with the National Data Centre and 5,170 post offices have been networked through broadband. This has enabled the India Post to offer services like as electronic Money Order (eMO), e-payment and instant Money Order (iMO).

Indian Post has plans to computerize and network all its post offices in the next two years. An Right To Information software has been developed as 4000 post offices act as points of receiving RTI applications and forwarding them to public authorities.

Railways

Rail Sampark, the authorised enquiry department has launched a premium SMS facility for users to obtain information regarding PNR status, fare, seat availability and arrival & departure.

A trial of the pilot project, Satellite Imaging for Rail Navigation (SIMRAN) using real-time train tracking through GPS and mobile (GSM) technologies has been successfully carried out by the Research Design and Standards Organisation (RDSO), Lucknow, in coordination with IIT/Kanpur.

RailTel has set up an OFC network of 37,000 route kilometres, of which 26,650 is of high bandwidth capacity. Till date, 231 important stations and about 3,276 other stations have been connected on the OFC network.

Related:
–Updated: Budget 2010: News Sites, Unique ID, GST, Gaming, Mobile, Banking
–Budget 2010: What The Digital Industry Wants
–Budget 2010: IRCTC Charges Reduced; E-Ticket Vans; SMS
–Budget 2010: ET Now-Facebook, NDTV Profit, Business Standard & India Today
–Budget: Web18 Launches MoneyControl MyTV; Integration?
–Budget’09: Economic Survey: FDI In Telecom, DNC, USO Fund, BSNL Deal; e-Payment

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Update: (March 2nd): It appears that Paypal will no longer require an Export Code, but a ‘Purpose Code. Much easier, this way. Read the update here.

Earlier (Feb 27th): The Reserve Bank of India has allowed Paypal to continue local bank withdrawals for settlements for exports of goods and services, Paypal has announced. The online payment and wallet service expects that users involved in export of goods and services should be able to use their that bank withdrawal service by March 3rd, after it has complied with the Indian regulations. For personal remittances, it will have to apply for approvals, which are likely to take time. These developments are along expected lines.

Among the changes being made, is that users will have to enter an Export Code when a withdrawal is requested, which indicate that the transactions will be cross-border merchant transactions, and not P2P money transfer. Personal payments will be suspended until approvals are received. It’s unlikely that many Indian companies using Paypal have an Export Code, so a majority of individual developers and startups will not be able to withdraw money to their bank account from Paypal. More details are expected from Paypal by March 1st (a holiday in India on account of Holi).

Paypal is trying to put a positive spin on the limited approval it’s received: “With purpose codes for export transactions and FIRCs (Foreign Inward Remittance Certificates), you should now be able to get the export related benefits you seek.” Read a related post on the PayPal blog here.

For details of the case, read our earlier report:Updated: eBay’s PayPal Disallows P2P Payments, Transfers To Local Banks

The email sent to Paypal users:

We have been diligently working with the RBI and our business partners to resume Indian bank withdrawals for the thousands of Indian businesses who depend on PayPal to sell their goods or services in the global marketplace.

Today, we are happy to announce that the RBI has allowed us to continue local bank withdrawals for settlements for exports of goods and services. We are currently making changes to comply with Indian regulations for settlements for exports of goods and services, and we anticipate that, as of Wednesday, March 3rd, customers will be able to use our bank withdrawal service.

As part of the changes, you will be required to fill out a new field entitled ‘Export Code’ when you request a withdrawal. This information is required under the current laws of India in order to identify the nature of cross-border merchant transactions.

On Monday, March 1st, we will be back in touch with specific instructions on how you can move your money into your bank account.

Moving forward, the RBI has told us that PayPal needs specific approvals to allow personal remittances to India, which we currently do not have. Until we get these approvals, personal payments into India will remain suspended. However, if you are an exporter, you will continue to be able to use the PayPal service for payments of goods and services. In fact, with the changes we are making to our system, PayPal is now set to be a more powerful engine for exporters in India. With purpose codes for export transactions and FIRCs (Foreign Inward Remittance Certificates), you should now be able to get the export related benefits you seek.

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The 22 month (probably stretch-able) implementation timeline comes into effect only after the process has received an approval. Meanwhile, the project file is moving from table to table within the government:

– The National Institute for Smart Government (NISG) has been engaged as Principal Consultant for design
and development of the project.
– A detailed report has been prepared, and has received an “in-principle” approval obtained from Planning
Commission and the Department of Information Technology.
– The Minister for Labour & Employment reviewed the project on 8th October, 2009 and suggested
the implementation across India at one go instead of a phased manner.
– A meeting was held with the State Principal Secretaries dealing with employment for finalizing the
implementation strategy on 18th December, 2009.
– On 30th December, 2009, Secretary (Labour & Employment) took a
meeting to finalize the implementation strategy.
– Based on the discussions held, DPR has been revised by the Consultants and received during the last week.
– DPR is being finalized and will be processed further for obtaining necessary approvals.

So it will take at least two more years. Or maybe four.

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Budget Announcements

(In reverse chronological order. We will clarify all of these announcements and update within 3 hours. Please check back for confirmed/revised updates. Also, please feel free to share your comments on the announcements below)

– 3G Auctions: Rs. 36,000 crores expected from 3G auctions in the 2010-11 fiscal

– Accredited News Agencies Online exempted from service tax: “Accredited news agencies which provide news feed online attract service tax. Acknowledging the yeoman services of such news agencies in disseminating news, I propose to exempt such news agencies that meet certain criteria, from service tax.” Update: this therefore applies to those news agencies that have been accredited, probably by the RNI. We’ll update this with details of the criteria. Thanks for the tip @madversity). I guess it’s time MediaNama registered as an online news agency

– Film Industry & Gaming: The film industry has been experiencing difficulties in importing digital masters of films for duplication or distribution loaded on electronic medium vis-a-vis  those imported on cinematographic film, owing to a differential customs duty structure. Now customs duty will be charged only on the value of the carrier medium (CDs, DVDs etc). This also applies to music and gaming software imported for duplication. In all such cases the value representing the transfer of intellectual rights would be subjected to service tax.

This will help companies like Sony and EA that distribute games in India, and promote import of masters to India, and manufacture of (legal) CDs/DVDs within the country.

– Cable & HITS: MSOs need to invest in digital headend equipment. The Finance Minister has provided project import status at a concessional customs duty of 5 per cent with full exemption from special additional duty to the initial setting up of such projects. Beneficial for setup of HITS.

– Mobile Phones and Telecom Accessories: Domestic production of mobile phones is now picking up in view of exemptions from basic, CVD and special additional duties granted to their parts, components and accessories. To encourage the domestic manufacture of accessories, these exemptions are now being extended to parts of battery chargers and hands-free headphones. Also, the validity of the exemption from special additional duty is being extended till March 31, 2011.

An outright exemption from special additional duty to goods imported in a pre-packaged form for retail sale has been provided for items like mobile phones, watches and ready-made garments even when they are not imported in pre-packaged form. The refund-based exemption is also being retained for cases not covered by the new dispensation.In

– Excise duty increased to 10% from 8%

– Limited Liability Partnership: “Last year, I had provided for the taxation of the newly introduced Limited Liability Partnership (LLP) on the same lines as exists for a general partnership firm. To facilitate the conversion of small companies into LLPs, I propose that this will not be subject to capital gains tax.”

– R&D Tax Deduction: Currently, any payment made to an approved scientific research association is eligible for weighted deduction and the income of the approved scientific research association is exempt from tax. Furthermore, weighted deduction on expenditure incurred on in-house R&D has been enhanced from 150 per cent to 200 per cent. The Digital industry had requested a 100% deduction.  Weighted deduction on payments made to National Laboratories, research associations, colleges, universities and other institutions, for scientific research has been increased from 125 per cent to 175 per cent. (Updated)

– MAT Increased: the Digital industry will not be happy. They’d asked for an abolition of MAT for Internet and Mobile companies. Instead, MAT has been increased from 15% to 18% of book profits. However, surcharge of 10 per cent on domestic companies to 7.5 per cent.

– Computerization of IT Department: computerisation in core areas of service delivery, to reduce interface between taxpayer and tax assessment of direct taxes. The Centralised Processing Centre at Bengaluru is now fully functional and is processing around 20,000 returns daily. This initiative will be taken forward by setting up two more Centres during the year. Setting up of two more centres.

– Technology Advisory Group to be set up under the chairmanship of Nandan Nilekani to look into various technological and systemic issues with projects being implemented with a technology infrastructure, like Tax Information Network, New Pension Scheme, National Treasury Management Agency, Expenditure Information Network, Goods and Service Tax. (Updated)

– Unique ID Project: the authority will be able to meet committment of issuing the first UID number in the coming year. Will provide a platform for targeted subsidy deployment and banking the unbanked. Allocating Rs. 1900 crores for 2010-11

(Also read: Railway Budget 2010: IRCTC Charges Reduced; E-Ticket Vans; SMS)

– Banking: Need to Increase geographic coverage of banks, and increase access to bank services. RBI is considering giving banking licenses to NBFC and private companies. This might give a boost to mobile banking, and telecom infrastructure aided banking services. Read about the RBI’s recent initiatives here. NREGA allocation increased to Rs. 40,100 crores. This will assist in banking the unbanked.

– Disinvestment raised during 2009-10 was Rs. 25000 crore. The government intends to raise more in 2010-11. So is the BSNL disinvestment finally on the cards? (Corrected)

– FDI Policy: FDI inflows were steady during the year, despite decline in global capital flows: India received FDI equity inflows of US$ 20.9 billion during April-December, 2009 compared to US$ 21.1 billion during the same period last year. Steps have now been taken to simplify the FDI regime to make it easily comprehensible to foreign investors. For the first time, both ownership and control have been recognised as central to the FDI policy, and methodology for calculation of indirect foreign investment in Indian companies has been clearly defined. A consistent policy on downstream investment has also been formulated. Another major initiative has been the complete liberalization of pricing and payment of technology transfer fee, trademark, brand name and royalty payments. These payments can now be made under the automatic route. (Updated)

– Goods & Services Tax: The finance minster said that it would be the governments “earnest endeavor to introduce Goods and Service Tax alongwith Direct Tax Code from April 1st 2011.” So the implementation of GST gets pushed to 2011. Not good news, especially for e-commerce companies that deliver across state lines. GST implementation requires computerization, as does commercial taxes.

– The worst is over for the Indian economy, says the Finance Minister, and 10% growth looks feasible.

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What The Internet & Mobile VAS Industry Want

(Note: We’ll be reporting the telecom and digital media components of India’s 2010-2011 Budget announcement live.)

– 100% Depreciation For Broadband Equipment (PCs, modems, routers) in the first year.

– Profits that accrue to web hosting enterprises based in India should be partially exempt from the income tax by at least 50% for the next 5 years.

– E-Commerce Sales Tax Waiver For 5 Years: but within limits to be prescribed by the Government. We think it’s unlikely that this will happen; why would the government want to create a different tax structure for offline retail versus online, and hurt India’s massive offline retail market which is probably the second largest employer in the country? However, if an implementation of GST is announced, this might help bring some sense of sanity to the situation of different taxes in different states.

– Broadband Allowance: All corporations, whether public or private, should be allowed to give a Rs. 6,000 per annum allowance to employees for broadband services access at home, which is removed from taxable income for the corporation. The same facility should be extended to self-employed professionals so that they may also reap the benefits of broadband services.

– Venture Capital Taxation: The IAMAI wants preferential tax treatment for long-term capital gains for Venture Capital Funds to be maintain. There’s some talk of long-term capital gains tax to be abolished. Question is: what is “long term” for VCs in India?

– Cybercafes exempted from Service Tax for at least 5 years, though the cyber café itself would continue to pay service tax payable to the respective Internet Service Provider for the Internet Connectivity.

– R&D Tax Exemptions: in 2007, the government had removed the tax shelter for companies investing in long term scientific R&D. The IAMAI has asked for 100% deduction under section 80(1)B (8A) should be extended up to 31 March 2012.

– Income Tax Exemption: Preferential corporate tax treatment for the high technology internet and mobile VAS sectors: The IAMAI has recommended that just in order to support the Internet and mobile content and services providers, access and transaction service providers should be exempt from Income Tax for 10 years under section 35 (A) of Income Tax Act with a very strict sunset clause.

– Waiver of Entertainment Tax: currently approximately 30% in certain states, levied on broadband subscriptions and entertainment services, if they are provided through a broadband or internet platform. The central government will have ask the state governments to implement this.

– Product Development, Bandwidth Charges and Software License Expenses to be treated as Revenue Expenditure: The IAMAI has request a separate guideline for 100% deduction on expenses related to product development, bandwidth and software licenses.

– Abolish MAT: While the CII has been more guarded with its request – asking the government to rationalize Minimum Alternate Tax (MAT)- the IAMAI has asked for MAT to be abolished for Internet and Mobile VAS sectors . Unlikely that this will happen, since the government is facing a huge fiscal deficit. The IAMAI’s rationale is as follows: technical expenditure are treated as capital expenditure, and hence a MAT is applicable at 15% of book profit.

– Service Tax: The IAMAI wants a 5 year moratorium on Service Tax for Online advertising, which only accounts for Rs. 400 odd crores annually, saying that service tax will hamper its growth. They also want a 5 year moratorium on online services like classifieds, drivers of Internet penetration under section 65 (72) [zh].

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– Sleeper Class tickets: lower by 33.3% from Rs. 15 to Rs. 10
– AC Class tickets: lower by 50% from Rs. 40 to Rs. 20

Now while the amount might appear to be small, one needs to take into account the scale at which IRCTC operates:

For example, in August 2009, the IRCTC did a total of 5,539,035 transactions, which amounted to Rs. 4,497,142,510 ($97.24 million). Arbitrarily assuming a ratio of 1:7 (AC: Sleeper Class), that would mean approximately 692,379 AC Class tickets booked, and 4,846,656 Sleeper class tickets.

This would amount to a reduction in service charges revenue of Rs. 24.23 million ($0.523 million) from Sleeper Class tickets, and Rs. 13.84 million (0.298 million) in AC Class ticket revenue. Please keep in mind that this is just an indicative calculation based on an assumption. IRCTCs transactions have increased since: in January 2010, they reported 6,547,581 successful transactions, of a total of 8,458,526 transactions.

Other Digital Related Announcements:

– The railways’ tie-up with the post office doesn’t appear to have worked out. Instead, the railways plans to add E-ticket vans to Government Medical College Hospitals, Courts, Universities, IT hubs, IITs and IIMs
– SMS updates of reservation status and punctuality of trains to passengers. This is already being provided by the Indian Railways in partnership with Spice Digital
– SMS updates on the movement of wagons to freight customers
– Implementation of RFID technology for tracking of wagons carrying coal and iron ore on three zonal railways.
– Optical Fibre Network: The Railway has 37,000 kms of optic fibre cables, and is working to add another 12,000 kms. It also plans to add 15,000 kms of optic fibre network through the public-private-partnership (PPP) model, and plans to provide last mile connectivity in urban and rural areas using the PPP model.  I’d spoken to RailTels a few years ago about its plans to introduce Wifi Internet at Railway Stations, and broadband in areas near Railway Stations. However, we’re not sure if these services are operational, and there’s no mention of its progress in the budget.

– A Centre for Railway Research is proposed to be set up in Indian Institute of Technology, Kharagpur for research in key areas of railway technology and to give a thrust to indigenisation. A Memorandum of Understanding (MoU) has already been signed with IIT, Kharagpur on 13th February 2010. Railways will establish strong research partnerships with premier institutes like IITs, NITs, CSIR and DRDO.

Related:

– Union Budget 2009: Digital & Media Stocks Drop Sharply
– Union Budget 2009: Govt Job Portal, STB Duty-5%, Smart Cards, DAVP Waiver, Disinvestment, Railways

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The Economic Times and ET Now have tied up with Facebook to let users share discuss the Union Budget for the financial year 2010-11. Something doesn’t quite fit when it comes to the deployment on the budget microsite: there’s a Talk to FM segment which allows users to comment, and has Facebook Connect integrated with it, but the rest of the microsite lacks Facebook connect. Why not integrate Facebook Connect with the entire microsite? Will help drive traffic to ETs budget page.

Like last year, there’s a Facebook integration with live streaming of ET Now’s budget coverage with news feeds and special updates. Users are able to comment and share comments with other users on Facebook. It will be interesting to see if ET Now TV anchors pick up comments from Facebook and highlight them on TV. NDTV has been rather pro-active with its Twitter integration into TV Shows.

NDTV Profit Revamps Site

With the budget around the corner, NDTV Profit has revamped its website into a clean looking, two column one with a dedicated budget page. The budget page has news, opinions, interviews and a wish list, all centered around the budget. At present, they have two interviews of Anil Khandelwal, CFO of Cox & Kings and Prasun Gajri, CIO of HDFC Standard Life.

The wish list section has video interviews of industry executives including Sarvana Kumar Ananthan, CIO at Tata AIG Life,  JC Sharma, MD at Sobha Developers and S Giridharan, Chairman & CEO of EdServ among others. The video advertisements are powered Vdopia.

Business Standard Joins The Fray

Business Standard too looks to draw more online users to its site with the budget fever setting in. Its new budget page is named “Run up to Budget 2010” and as expected it has regular sections like Budget Expectations and Budget Columns. Users can also access previous budget stories. Other sections include Budget Trivia and Budget Glossary.

India Today’s ‘Special’ On Budget 2010

India Today also has a budget special subsite and has taken a step further, allowing users to receive Budget updates on their mobile via SMS. Nothing new here again amongst categories: News Glossary, Previous Budgets, Expectations, Surfer Zone and Experts. Surfer Zone is a dedicated section for comments on the budget from readers.

Related:
–Budget: Web18 Launches MoneyControl MyTV; Integration?
–Union Budget 2009: Digital & Media Stocks Drop Sharply
–Union Budget 2009: Govt Job Portal, STB Duty-5%, Smart Cards, DAVP Waiver, Disinvestment, Railways
–Budget 2009 WebStream: ET Now, NDTV, UTVi, Indian Govt; Facebook, Coveritlive

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