Published Editorial

Budget 2013: Little cheer for tech enthusiasts

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Economic Times


Vivek Pachisia
Tax Partner

NEW DELHI: Tech enthusiasts in the country have little to cheer about in this budget. Those of us who were waiting to buy that latest phone or tablet or planning to store our digitized memories on a hard drive have got no smiles from the budget.

With recent data suggesting that the consumer spending has come down, a reduction in excise duty would have perhaps induced some of us buyers to open our purse strings and spend on these items. However an increase in excise duty from 1% to 6% on phones costing more than Rs 2,000 would mean that the phone of our dreams have become that much more expensive.

Perhaps the Finance Minister should have been more in touch with the times and in continuation of his theme of taxing the wealthy and items of their use, should had limited the increase in tax to the really high end phones. This considering that today mobiles are more of a necessity than a luxury and the definition of luxury for mobile phones surely cannot be said to start at a price tag of Rs 2,000.

Perhaps the Finance Minister wanted to provide a boost to the Indian Phone industry, which does have phones in this range. However one must consider that in reality is this concession is only promoting the sale of low end technology in India and indirectly leads to denial of access to mobile based web services to masses, for whom mobile has become an easy way to access such services.

Television, another source of entertainment for middle class has also been indirectly targeted. In many parts of the country, especially covering the tier 1 cities, set-top boxes are already compulsory as part of the digitization move and the digitization is only likely to expand its coverage to the tier 2 and tier 3 cities with the set-top boxes becoming mandatory for a larger population in the country.

These set-top boxes will now become more expensive with the customs duty on them being increased to 10%. Another aspect that we must remember is that there are always other taxes that are related to some of the services associated with these goods. For instance the proliferation of internet is a major reason for increase in sale of smart phone and tablets. However there is already a service tax on the rate of 12.36% on the internet and telephony services and all telecom or other related services.

Supply of set-top box is associated with provision of broadcasting services by DTH providers, who again are required to charge service tax on these services. Balancing of increase in tax rate on these items with moderation in service tax rate would have benefitted a growing sector and helped an increasingly aspirational nation. However one must admit that perhaps these taxes are lower than in what exists in some of the other parts of the world.

The only concession to the tech world seems to be in terms of providing an exemption from education cess on items which are considered as accessories of computers so that they enjoy the same exemption as is provided to computers. However this impact is minimal and depending upon the accessory is question could be in the range of 0.18 % to 0.36%.

(Views expressed here are personal)