Newindpress

Bangalore, Mar 1: The Union Budget seems soft on hardware and hard on software. While the hardware industry has hailed the Budget with glee, the software service companies see a threat to their bottomlines from the fresh levies.

Finance Minister Chidambaram has extended fringe benefit tax (FBT) to employees stock option plan (ESOP and introduced minimum alternate tax (MAT) on corporate profits. Although Infosys chief mentor N R Narayana Murthy has been quite firm in his views that IT companies must pay taxes, not many from the software industry share his sentiments, including his own Infosys Technologies.

Infosys CFO V Balakrishnan on Wednesday said MAT and FBT would eat into the industry's margins. Manufacturing Association of Information Technology (MAIT), however, welcomed Chidambaram's decision to maintain the current excise and custom duty levels on IT products.

Wipro CFO Suresh C Senapaty said, ``Introduction of MAT in a situation where there is a committed relief till 2009 is a retrograde step and not consistent with the principles of good governance. The industry is disappointed that the much expected extension of the sunset timeline of 2009 did not happen, particularly when the PM himself has set a much higher target of exports for the industry than what was forecast. In an environment when the knowledge industry requires focus on building, attracting and retaining talent, imposition of FBT on ESOP is inappropriate and untimely.''

``The hardware industry supports long-term stability in policies and duty structures as frequent changes could adversely impact the investment and business plans of the industry. The last fiscal witnessed impressive growth in IT consumption as well as manufacturing investments and we are confident this momentum will continue this financial year,'' MAIT executive director Vinnie Mehta said.

He also hailed the increase in budgetary allocation for e-governance at the Centre by 82 percent to Rs 719 crore, and to State Governments by 66 percent to Rs 500 crore, in addition to the decision to computerise the public distribution system (PDS) and the Food Corporation of India (FCI).