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Budget 2012: Indian electronics industry's wishlist

Posted: 16 Mar 2012     Print Version  Bookmark and Share

Keywords:Union Budget 2012-13  India semiconductor industry  National Policy on Electronics 

The Union Budget for 2012-13 will be tabled in the parliament today. Besides the "aam-aadmi," India Inc. is eagerly waiting for a budget that works in their favour. While all sectors want benefits from the budget, EE Times India focused on one of the high-interest areas: the Indian electronics industry. Here is a compilation of "wish-lists" from the industry on what they expect from the budget. How does today�s budget measure up to their expectations?

Jaswinder S. Ahuja, corporate VP and MD, Cadence Design Systems: For the year 2012-2013, the Union Budget should address the challenges of keeping the economic engine running in the midst of the global uncertainties that can have a ripple effect in India. Closing of the fiscal deficit without impacting the GDP growth rate; promotion of inclusive growth initiatives are some of the key areas that we hope the budget will highlight. To this effect, technology can play a big role in helping India overcome infrastructure challenges as well as resource deficiencies that we face.


Ahuja: There is need to push forward the much-needed reforms and pending legislations.

For the semiconductor industry, the coming year will be characterized by opportunities and challenges, especially given the push towards the formation of the National Policy on Electronics to help India kick start its nascent local manufacturing industry and become a global hub of excellence for the design and production of electronic goods. To encourage and stimulate the domestic industry and promoting locally designed products, there is a need for tax exemptions and R&D grants. Some of the pivotal issues that need to be addressed in the 2012-2013 Union Budget centre around semiconductor design, high-tech manufacturing, encouraging pre-competitive research, and amendments to tax and duty structures. Favourable policies addressing these areas will support the domestic semiconductor industry to compete aggressively in the global market, as well as encourage the growth of the local market.

There is need to push forward the much-needed reforms and pending legislations. The Government needs to take urgent steps in the passing of the long overdue Companies Bill. The early implementation of the Direct Taxes Code and the Goods and Services Tax are also important.

Vijay Krishnamurthy, CFO, SmartPlay Technologies: Abolition of service tax on inputs provided to 100 per cent EOUs—Since in any case, such service tax is fully refundable but due to procedural bottlenecks, the service tax refund is delayed thereby blocking funds, it is desirable to simplify the process by abolition of service tax to be charged on services consumed by 100 per cent EOU's based on their status certificate furnished to the service providers.

Companies, whose turnover from the specified activities exceeds 50 per cent of the total turnover of the company, should be given a MAT exemption in view of their potential to impact the national economy through a high multiplier effect. MAT exemption can be selectively extended to industries having high multiplier impact and linked to certain conditions to be fulfilled. This will stimulate and strengthen the multiplier impact on the national economy by providing such industries additional funds to reinvest.


Krishnamurthy: Government should provide a tax holiday to newly set-up manufacturing units in the ESDM/EMS industry.

SME's make up the backbone of the Indian economy and also provide the entrepreneurial energy required to accelerate the economic growth. While business challenges are understandable in the evolution of these SME's as they scale up, the regulatory process places an unnecessary and unfair hardship on these SME's and places them at a competitive disadvantage when they compete in the global marketplace with their peers from other countries. Specific instances are blockage of funds in the form of service tax and income tax, where the refund process is inordinately delayed. There can be a general concession/waiver for SME's (threshold to be defined to qualify as a SME) who can be given the facility to pay based on self-assessment on a quarterly basis and a Chartered Accountant report furnished along with the Return to the Dept. This will avoid the current process of being subjected to withholding taxes/input service tax and then applying for a refund. The current provision of making an application for withholding taxes at a lesser rate is cumbersome and unnecessary if an across-the-board exemption from withholding taxes is provided to SME's. So also for input service tax and a SME can furnish an eligibility certificate to the service provider to be exempt from the levy of service tax.

To stimulate innovation, IP creation and product development in India it is necessary for the Government to endorse initiatives and commit funds to foster growth in semiconductor industry and vitalise the electronic ecosystem. This can be by way of a partnership between the Ministry of Science and Technology, Indian Semiconductor Association and universities, based on a corpus to be created with the major contribution coming from the Government.

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