We’re reporting the telecom and digital media components of India’s 2010-2011 Budget announcement live. To watch a live stream try: Indian Goverment WebStream, CNBC-TV18, ET Now (requires Silverlight install), NDTV Profit.
(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
— 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.