The union budget 2010 is out and everybody is trying to answer the big question, whats in it for me? So does Mobile Gyaan, we present you with a comprehensible analysis of what this year’s budget means to the Telecom industry and its ever growing customer base. For Your convenience, we have classified all the proposals affecting the Mobile industry into "GOOD" and "BAD", some of the financial terms have also been simplified for you, because this time around we intend to give you a tab of Financial Gyaan as well.
Imported phones will continue to be cheap.
Have you ever wondered why the imported Chinese mobiles that are filling up the shelves in Indian stores are so cheap? Well, cheap labour and bulk production are definitely a factor but another reason that very few of us might know is that these devices are exempted from the payment of Special Additional Duty (aptly abbreviated as SAD) which is currently levied @ 4%. This exemption was to be lifted off from June 2010, but thanks to Pranab uncle, this exemption is now extended till 31st march 2011, which means the cheap Chinese phones are here to stay.
Prices of mobile accessories to go down.
Another sigh of relief came for the mobile device manufacturing industry when Mr. Mukherjee proposed that the import duty levied on components that go into the making of Batteries, chargers and headsets @ 24% is going to be removed which means you can once again start saving for the Bluetooth headset that you could otherwise never buy.
Service Tax remains unchanged.
We will continue to pay service tax @ the existing rate of 10% as opposed to certain speculations that it will be increased back to 12%. This means a saving of Rs 2 on every Rs 100 that you recharge into your phone. Not a Big difference!
Minimum Alternate Tax (MAT) raised from 15 percent to 18 percent
For all of you who do not know what MAT is, it is an alternate way of taxing those companies who do not have sufficient profit as per the IT act. Here a flat Rate of 15% is levied on the Book Profits of the company. Since most of the Indian telcos pay their taxes under MAT, this increase would be a blow. Fortunately, this will be marginally compensated by the decrease in surcharge from 10% to 7.5%. Thank God, because the companies cannot pass on this additional burden on the end consumers.
No proposals on the timeline for 3G auction.
The 3G auction uncertainties continue to keep us on our heels, the Fin-Min hasn’t announced any timeline for the auctioning. But it is very likely that the auction will be completed this year as invitations for Bids have already been sent. Moreover, the budget includes an estimate of Rs 35,000 Cr on account of 3G auction receipts in the year 2010-11. Which means that TRAI is all geared up for the auction this year.
Apart from this, the budget contains various other proposals which will indirectly impact the industry like the hike in petrol prices. We will continue to gauge the impact of these changes after the budget gets passed in the parliament and the changes get applicable.