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February 28, 2001                                       Feedback  

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Impact on companies in the Infotech sector

Issues

  • Lower excise duty on hardware components
  • Tax benefits in STP even after change in ownership
  • No tax on e-com transactions

Initiatives

  • No additional tax liability
  • M&A activities facilitated, overseas investment eased
  • Definition of software exports widened

Profitability of IT companies remains unaffected as no new taxes have been levied. Continuation of tax benefits irrespective of change in management (10A) and recoginition of onsite services as exports (10B) will facilitate domestic consolidation. The move to allow companies which have issued ADRs/GDRs to make foreign investments up to 100 per cent (50% earlier) of proceeds and acquire shares of foreign companies up to $100 million will help overseas acquisitions.

Wipro

Wipro's Infotech division will benefit from the overall positive initiatives for the industry. The impact is positive even for its non-IT divisions. The consumer care division will be a net gainer with the reduction in custom and excise duties for raw material and finished product. There will be a marginal impact due to service tax on its subsidary Wipro Net.

Infosys Technologies

The budget has a special incentive for Infosys besides the general industry sops. For more than a year now, Infosys has close to around Rs 400 crore cash which has been embarked for overseas acquisition. With foreign investment norms being eased to allow 100 per cent utilisation of ADR proceeds will help Infosys.

NIIT

The overall impact is positive on NIIT which derives equal revenues from its software training and software dvelopment activities currently. There has been no additional tax liability on both software development and software training. NIIT will also be a beneficiary of the increase in foreign institutional investor limits to 49 per cent.

Source: Business Standard

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