The Union Budget, which, as Sahad pointed out earlier, has had little for media companies, been negative for VCs, and disappointing for Telcos. There are positives with increase in outlay for e-governance, and a fillip for technology incubators. Some vignettes:
e-Governance
— Allocation for e-governance in the Union Budget, has been increased from Rs.395 crore in 2006-07 to Rs.719 crore in 2007-08. Of this amount, Rs.500 crore will be allocated to State Governments.
Telecom
— The unification of taxes and fees for the telecom industry has been delayed: the Department of Telecom has been asked to “constitute a committee to study the present structure of levies and make suitable recommendations to Government.” The Financial Express quotes AUSPI estimates, according to which the government levies from license fee, spectrum fee and service tax is estimated to increase from Rs 25,142 crore in 2006-07 to Rs 30,856 crore in 2007-08.
— An increase in education cess from 2 percent to 3 percent will marginally increase cost-to-consumer for mobile services.
— Service tax has been extended to cover Mobile content and VAS companies, those involved in the “development and supply of content for use in telecom and advertising purposes.” More here.
Media
— An increase in investment for Doordarshan and All India Radio: from Rs.41.11 crore in 2006-07 to Rs 217.44 crore in 2007-08. More at ET)
— ESOPs now come under the ambit of Fringe Benefit Tax, so that would impact media companies who are planning to use ESOPS to retain employees and reduce churn; allocations might reduce.
— Manmohan Shetty, CMD of Adlabs writes in the Financial Express that there might be a reduction in import duty on digital filmmaking equipment; import duty on 15 specified machines has been reduced from 7.5 percent to 5 percent. We’ll update with details.
Venture Capitalists, Technology Incubators and Startups
— There’s some incentive for technology incubators and startups being incubated by them: All technology business incubators have been exempt from service tax, and those incubatees with a turnover of less than Rs.50 lakhs a year will be exempt from service tax for the first three years.
— Pass through benefits for Venture Capitalist firms have been restricted to certain categories. Details here.
Additionally, the government has proposed to raise tax exemption for small service providers from Rs. 4lakh to Rs.8 lakh.
On the expenditure side, the Dept of Telecommunications has an estimated outlay of Rs. 25562 crore, while the Department of IT has an outlay of Rs. 1749 crore. Estimated outlay for the Ministry of Information and Broadcasting is down from Rs. 538 crore in 2006-07 to Rs. 475 crore in 2007-08.
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