The digital industry, represented primarily by Internet and mobile value added services companies, have suggested a long-term growth package for the development of digital content and services industry in India in the forthcoming Union Budget. In a pre-budget memorandum sent to the Finance Ministry and to the Department of Information Technology through their representative body, the Internet and Mobile Association of India (IAMAI), the industry has suggested few steps in order to ensure long-term growth of the industry.
First recommendation is regarding the preferential corporate tax treatment for the high technology Internet and mobile VAS sectors, wherein has recommended that content and service providers on Internet and mobile; transactions on Internet and mobile and companies providing Internet and broadband connectivity be exempted from Income Tax for 10 years under section 35 (A) of the Income Tax Act with a very strict sunset clause.
The second step to ensure long term growth is fiscal benefits for e-commerce, wherein the Government of India should also recommend to all State Governments to waive sales tax on goods and services that are transacted through electronic mode (e-commerce) for the next five years, up to limits to be prescribed by the Government. This recommendation should be then followed with legislation to ensure execution by the State Governments.
The third step as suggested by IAMAI is ensuring growth of Internet services with five-year moratorium on service tax, wherein the IAMAI recommends moratorium for a five-year period on service tax under Section 65 (72), which, according to them, will allow this nascent industry to grow in size and stabilise and be in a position to accept additional tax responsibilities.
In a prepared statement, Subho Ray, President, IAMAI, said, “Everyone recognises that the digital industry is capable of delivering huge positive externalities, especially for rural areas. It is time that the industry should incentivised to do so.”
exchange4media spoke to some industry players to find out their expectations from the Union Budget 2010.
According to Ashwin Damera, CEO and Co-founder, Travelguru.com, “E-commerce and the digital industry are still in very early stages of growth in India. I believe that if the Government provides concessions to the industry, then surely its growth can accelerate. Some of the ways in which the Government can help are by abolishing service tax for e-commerce transactions, ensuring cost of Internet bandwidth in India is lowered significantly, better cyber and IT laws with quicker implementation of dispute resolution, and by promoting alternate payment options that can be used for e-commerce transactions. Some of these are quick wins and can be quickly addressed by the Budget, and some like IT laws are ongoing issues.”
Rohit Sharma, CEO, Zapak Digital Entertainment, noted, “What the Government should do is create more incentives for consumers in better access of broadband, and I believe it is high time the Government should provide packages for service providers of broadband, which could be either incentivised or perhaps even given tax holiday. As a result, broadband growth will become much better in terms of regulatory issues and pricing issue.”