Infotech Training, Net Surfing Rates May Go Up

Information Technology

The 2003-04 Budget may have provided a push to the hardware and software services sector, but the inclusion of the training and franchising services sector and Internet cafes under the service tax net may raise the costs of training from private infotech institutes and Net surfing.

As per the Budget proposals, a service tax of 8 per cent will be levied on vocational training, coaching and franchising services.

The Rs 1,000-crore infotech training market, which has been reeling under the pressure from lack of students, will be in for an additional tax burden.

This means that the fees for infotech education will go up further. Companies are, however, looking at various options before taking a decision.

 

"In the present scenario, the levy of service tax will stifle the growth of the institutes and unnecessarily impose an additional burden on students," said Pramod Khera, chief executive officer and managing director, Aptech Ltd.

The market seems to become tougher for the Internet service providers. The Budget proposals call for the continuation of service tax for Internet service providers at 8 per cent.

It also brings in Internet cafes under the service tax net. "The continuation of service tax, and its increase from 5 per cent to 8 per cent, however, is a drag on an industry that is in a nascent stage but poised for growth," R Ramaraj, managing director and chief executive officer, Sify Ltd.

It is also expected that the rock bottom pricing by most of the Internet cafes will also increase soon. Internet cafes had been offering as low as Rs 5 to Rs 10 per hour of surfing.

The Budget recommendation on Internet service providers regarding Customs tariff on radio communication equipment as well as micro wave communication equipment is not clear.

"The recommendation on Customs tariff reduction for customer premises equipment, including modems, set top boxes, cable modems, wireless local area network equipment, needs to be clarified. We trust that these are included because they will give a fillip to industry," Ramaraj said.

Besides, inclusion of annual maintenance contracts (AMCs) for services under the service tax net is likely to put an additional burden on the earnings of the domestic hardware companies, which are going through a rough patch.

Post-sale annual maintenance contracts have been a source of income for the domestic hardware companies.

"Inclusion of the contracts under the service tax net is not a good news for the hardware companies. With low margins in hardware sales, most of the companies depend considerably on services contracts," said Vinnie Mehta, executive director, Manufacturers Association of Information Technology (Mait).