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."