The Indian Union Budget 2010 is setting up the government for some serious ridicule from the Indian Internet community if this Business Line report is true. Here are the highlights:
- 10% service tax on all downloads of paid software/apps onto a mobile or PC.
- 10.3% service tax on software/apps created by “foreign suppliers” (due to a clause called ‘reverse charge principle’)
- Individual users will have to register for the service tax provisions and file the statutory returns for every piece of software they buy online, even for personal use.
- This move will not impact free applications or software.
- A significant chunk of the population will decide not to buy apps
- The grey market activity in pirated/cracked software and apps will increase dramatically.
- Users however will continue to download and use free apps. With the Indian mobile market already 500 Million strong and growing, the economics of maintaining an app-store (from a carrier/device manufacturer standpoint) will change quickly into a not-so-profitable venture.
- App developers will be especially hard hit, given that their smaller sizes mean that their primary sources of revenue will evaporate. To sustain this impact, I believe app developers will have to adapt their applications to be free and ad-supported. “Foreign” suppliers (like apps on iTunes) who do not adapt to this new reality, will lose customers in India for good.
While it is too early to say whether these ridiculous provisions spell death for App-stores in India, it is evident that the Indian Government has murderous intentions.