VAT implementation to be beneficial in Karnataka

The Karnataka government reaffirmed its stand to bring in the VAT regime
starting April 1, 2005 at the presentation of the state budget on March 11. This
means that the state's IT hardware industry, which was reeling under the
effect of the steep sales tax of 13.8% (the highest in the country), would now
have a tax of just 4% under the VAT regime. Around 30 electronics and computer
components and software would come under the 4% tax bracket. The upshot ­
cheaper PCs and peripherals for the consumer.

On the infrastructure front, the government will allocate Rs 95 crore for the
Bangalore international airport and Rs 109 crore for the metro rail project.
Elaborating on the investment, Deputy CM and Finance Minister, Siddaramaiah
said, "The international airport will position Bangalore as an important
passenger and cargo hub in the region and provide a fillip to tourism and
exports."

This should come as a welcome relief to the IT industry which has been
voicing its concerns over the deplorable infrastructure in Bangalore. Karnataka's
overall economy grew by 11.7%, while the services industry consisting of IT, BT
and BPO grew by 22.5% over the last year.

Commenting on the budget, Infosys CFO, Mohandas Pai said, "The IT sector
has a large role to play in the tax buoyancy, having created 2,50,000
high-paying jobs. Investment in the social sector has increased and the
Karnataka FM has done a very good job of managing finances. The future calls for
much greater investment in infrastructure."

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