The Indian Union Budget came out yesterday. And the IT industry is not happy about it. Well, we got shocks too! The tax holidays for export oriented companies are no more. So we got to pay minimum 10% tax. There is now an additional tax on rented commercial premises – 12.5%. And ESOPs are covered under FBT now!
What does it mean? It means the margins go down – from the already low positions! The cost of renting a premises is very high in a city like Mumbai, and if we have to pay 12.5% on top of it, it’s just crazy. When it comes to premises, they already have it so bad – you have to pay taxes for about 100% of the rent itself now. The owner will not bear them, so the burden comes to you! And if you pay double rents, you may be losing all your profits right there if you are a medium size IT company in Mumbai! If it’s not that good, you may even go red.
The 10% minimum tax too is bad. We got the tax exemption after so many formalities and hard work. Now we even lost that advantage.
The budget does not make an ITentrepreneur happy. It disappoints him. This is not good!
Yeah, it hits smaller companies more!
Companies holed up in “Software Parks” and other sanctuaries get 10 year tax breaks but mortal companies!?
Nirav,
There has been a feeling so far in many segments of Corporate India that IT companies were making great money by doing too little work and I think they have come to bear on the FM to create a so-called level playing field.
No better example of killing the Goose that lays the golden eggs?
do check out my latest post on the Impact of Budget on the Software / ITES sectors here