Less than 24 hours from Budget 2017, the IT sector shivered from a remapped proposal of H1B programme, sending IT stocks southwards. The fervent hope was that the finance minister would, like a doctor, give a curative prescription to mitigate the “Trumpanomics”. One has to look at the provisions minutely from that perspective to examine the “feel good” factor, or the lack of it.
The penal provisions of Minimum Alternate Tax (MAT), under Section 115JB, has been amended to extend the carry forward entitlement of such taxes initially paid from 10 years to 15 years. The bill further reduces corporate tax rate from 30% to 25% for assessees with turnovers of less than Rs 50 crore. This is a positive for the SME sector in the IT/ITES space, whose business may be curtailed by an inability to render onsite services in the US, depending on the proposed H1B rules. But there is no reduction in either corporate tax rates or MAT.
Thrust of the budget is to promote digital economy for speed, accountability and transparency. Proposed measures include reduction of presumptive taxation on income from non-cash transactions from 8% to 6%. This will benefit small and medium tax payers with turnovers of up to Rs 2 crore. As a boost to digitisation, tax deductible of revenue expenditure in cash has come down to Rs 10,000 per transaction, from Rs 20,000, thereby promoting online payments. Capital expenditure has also been covered under this limit, which didn’t exist earlier. The bill further prohibits payments in cash above Rs 3 lakh per transaction.
To further enable digital transactions, concessions have been proposed in indirect tax levy in form of excise and basic custom duty on digital equipment like m-POS, micro ATM standards version 1.5.1, finger print readers/scanners and iris scanners. The continued focus on moving India towards a more transparent and digital economy is encouraging in order to capitalise on long term gains of the painful demonetisation exercise. The move to curb the black economy also bodes well for accelerated GDP growth.
K V Ganesh
Chief Financial Officer, Subex Limited