Budget 2017 packs a massive digital push

The first combined union and railway budget packs a massive push for the digitization of the economy with several new technology investments.

Arun Jaitley’s 2017-2018 budget will go down in the history as the first combined union Budget, with both the general and railway budgets. The biggest cloud looming over this budget was the demonetization of INR 500 and INR 1000 notes in November 2016 which catalyzed digital payments along with a strong push towards a cashless economy.

Jaitley’s budget was riddled with references to the future of India as a digital economy as he said how demonetization will lead to a better GDP. Here are the top seven highlights from budget 2017-18 which will affect the IT industry this financial year. 

1. Aadhar Pay, an app for digital payments for merchants will be launched soon. It is an Aadhar-enabled payment system compatible on Android smartphones which will help Aadhar card holders pay without any instrument of their own. Each merchant needs to download the application on their device and connect an Aadhar biometric reader. To make a payment, a consumer has to enter the name of her bank, Aadhar number and verify the transaction by using her fingerprint on the connected biometric reader.

2. After announcing a reach of 1.25 crores through the common UPI app, BHIM, Jaitley further announced the launch of two new schemes to make cashless transactions beneficial to merchants and customers alike. Additionally, the government will promote and even try to mandate digital payments at outlets like petrol pumps, RTOs, universities and hospitals.

3. This year’s budget also announced an allocation of INR 10,000 crores to BharatNet program with the aim to bring optic-fiber based internet connectivity across 1.5 lakh gram panchayats. The FM announced the proposal of DigiGaon, a new initiative which aims to provide education, telemedicine and skills by leveraging digital technology.

"Additional outlay of Rs 10,000 crore for BharatNet and creation of ‘Digi- Gaon’ is positive to Broadband penetration; however BharatNet implementation track record needs to significantly improve for benefits to reach rural India." - Jaideep Ghosh, Partner, KPMG in India 

4. The first united general and railway budget announcement further highlights the government’s push towards a digital economy with the withdrawal of service taxes on railway bookings made through IRCTC.

5. With the plans of building a great digital economy, comes the additional responsibility to make sure the country’s infrastructure is secure and can withstand emerging cyber threats. The government announced the setting up of a dedicated Computer Emergency Response Team (CERT) for the financial sector, comprising of computer experts and scientists who will help in securing India’s online presence. To boost digitization even further, the team will link regulators like SEBI and RBI.

6. Companies incorporated post March 31, 2016 can now get a three-year tax holiday in their first seven years, a rebate which was earlier available only during the first five years. Additionally, the FM proposed to reduce Income Tax for companies with an annual turnover of up to Rs 50 crore to 25%, handing a reduction of 5% to the Micro Small and Medium Enterprises.

"While this will help SMEs, the absence of overall reduction in tax rates, introduction of secondary transfer pricing adjustments and interest limitation rules could dampen investor sentiment in an industry which has faced challenges in these areas." - Pallavi Singhal, Partner - Direct Tax, PwC

7. The government allocated an increased budget of INR 745 crores towards schemes like mSIPS and EDFs in 2017-2018 in an attempt to build India as a global hub for the manufacturing of electronic goods and components.