Union Budget 2022: Here’s a Look at All the Important Announcements Made for IT Industry

Union Budget 2022 is being announced on 1 February, and the focus would be on helping industries generate employment in India

Union Budget 2022 is being announced by Nirmala Sitharaman, Union Minister of Finance, Government of India, amidst high expectations from the IT industry. The industry was hoping that the budget announcements will help industries overcome the financial stress suffered due to the the ongoing pandemic, and also generate employment. 

“This year’s budget will have high expectations from every section of the society, especially with the given adverse impact of the Covid-19 pandemic. We believe that India has the potential to become a global manufacturing hub thus, the government’s ‘Vocal for Local’ program needs a further push to boost the domestic industry through domestic consumption. We are expecting that in the upcoming budget Government should go for immediate import substitution and create duty differentials so as to attract domestic manufacturing as against trading of imported finished goods, this will really support IT hardware manufacturing in the country,” said KG Prabhu, Group chief financial officer, Smartlink Holdings Ltd.

Along the same lines, Arun Balasubramanian, MD - India & SAARC, ServiceNow, added: “Digital technology and connectivity continue to be the foundations of India's growth and rise to global prominence.  We must maintain the additional momentum driving digital adoption created by the pandemic because of the clear benefits derived; the creation of efficient businesses, new jobs, and the overall development of society.”

MSMEs were also hoping for some considerations from the Union Budget 2022 under GST and TDS in order to overcome the negative impacts of the pandemic, and regenerate  employment. “MSMEs are the backbone of the Indian economy and have an important role to play in the country becoming self-reliant. Given 2 years of uncertainty and the on and off shutdowns, these businesses have faced issues with constrained cashflows, increasing input costs, and a continuous compliance burden. The government has taken several steps to help alleviate these concerns, and several more, with a primary focus on increasing access to lower cost capital, relaxing conditions under the GST Law related to availing Input Tax Credit, along with improvements to curb increases in input costs will go a long way in uplifting the sector that provides the most employment in the country,” said Tejas Goenka, managing director, Tally Solutions.

“India has the potential to create the next software product hotspot in the world. The first thing is to recognise Software Products as a category in its own right where classifications under both the HSN and SAC codes. This classification will help in providing clarity and appropriate incentivisation for the industry. It is then important to recognise that software products are research and development led businesses that can have lengthy gestation periods to commercialisation, and therefore the Government should continue to incentivize the research and development credits. Sales and distribution of software products with the current classifications are difficult and cashflow consuming, whereas the same cannot be said for other products in the country. Presently, the Income Tax rules do not distinguish products and services and so TDS at 10% is applicable on the sale of software versus TDS at 0.1% for goods. A correction here is imperative to spur growth for the domestic sale of software products, especially to smaller businesses across the country. Finally, the government should treat this industry similar to a high skilled manufacturing company since many of the contours are similar and so a reduction in corporate tax rate to 15% can enable large investments into the sector creating highly skilled and highly paid jobs,” he added about the software products industry. Let us now take a look at what was announced for the Industry under the Union Budget 2022.

Announcements Made under Union Budget 2022 That Are Relevant for IT Industry

• Projects in National Infrastructure Pipeline which pertain to 7 engines will be aligned with PM Gati Shakti Framework Touchstone of master plan will be world class modern infrastructure, logistics synergy among different modes of movement and location of projects.
• Gati Shakti is driven by 7 engines: roads, railways, airports, ports, mass transport, waterways. logistics infrastructure. All 7 engines will pull forward the economy in unison supported by energy transmission, IT communication, bulk water and sewerage and social infrastructure.
• Aim to achieve 9.2 percent growth through macroeconomic growth focus + microeconomic welfare focus promoting digital economy, FinTech, tech-enabled development, energy transition, climate action, virtual cycle starting with public investment, crowding in private invest.
• Skilling programs will be reoriented. For skilling, upskilling and reskilling of youth, Digital DESH e-portal will be launched.
• With 1486 union laws repealed, Ease of Doing Business 2.0 will be launched. The idea of trust based government will be followed.
• With the aim to take Digital Banking to every citizen. 75 digital banking units in 75 districts of the country will be launched.
• Use of Kisan Drones for crop assessments, land records, spraying of insecticides is expected to drive a wave of technology in Agriculture and farming sector.
• ePassports will be rolled out in 2022-23 for convenience in overseas travel.
• Battery swapping policy will be brought out to promote EVs.
• Private sector will be encouraged to create sustainable and innovative business models for battery and energy as a service, improving the efficiency in the EV ecosystem.
• 'One Nation, One Registration' will be established for anywhere registration to facilitate ease of living & doing business.
• Emergency Credit Line Guarantee Scheme will be extended up to March 2023, the guaranteed cover will be expanded by Rs 50,000 crores to total cover of Rs 5 trillion. Additional amount earmarked exclusively for hospitality, and related sectors.
• The laying of optical fibre in all villages to be completed by 2025.
• Settlement of 75% of running bills in 10 days to be established. To reduce delays in payment, paperless ebills to be set up by the Ministries.
• A task force for the promotion of animation, visual, gaming and comic will be set up, aiming to employ youth in the visuals and animation sector.
• Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) to be revamped with required fund infusion Will facilitate additional credit of Rs 2 lakh crore for Micro and Small Enterprises and expand job opportunities.
• UDYAM, e-SHRAM, National Career Service (NCS), and ASEEM portals will be interlinked, to widen the scope and will henceforth perform with live organic databases with G2C, B2C, B2B, relating to credit facilitation, and recruitment to formalize economy and create job opportunities for youth of the country.
• Raising and Accelerating MSME Performance (RAMP) with an outlay of Rs. 6,000 crore over 5 years will be rolled out to enable the MSME sector to become more efficient, resilient and competitive.
• National Skill Qualification Framework will be aligned with dynamic industry needs. Digital ecosystem for skilling and livelihood e-portal to be launched, to enable citizens to skill, reskill, and upskill to enable discovery of relevant jobs, and entrepreneurial opportunities.
• Outlay for capital expenditure increased by 35.4% from previous year to 7.50 lakh crore in 2022-23. Green Energy and Clean Mobility systems have immense potential to modernise the country, make Indian industry more inclusive and generate employment for the youth, said the finance minister.
• Digital currency using blockchain to boost digital economy. Digital Rupee to be issued by RBI starting 2022-23.
• Digital University to be set up to provide access to students across country, to world class quality universal education, with personalized learning experience University to be built on a network hub and spoke model, with collaboration of best public Universities.