The abolition of basic customs duty on specified infrastructure equipment for Internet is likely to result in higher Internet penetration and improvement in the financial condition of Internet service providers, according to the industry.

Internet infrastructure consists of about 40 per cent of the total cost of ISPs and with the removal of customs duty, they would now be able to invest more in the network to improve quality of the service besides bringing down their cost of infrastructure, Amitabh Singhal, secretary, Internet Service Providers Association of India told PTI in New Delhi.

Regulatory measures like high leased line as well as dial-up costs for the ISPs would, however, prove a deterrent despite abolition of duty on Internet equipment infrastructure and excise duty cuts on PCs.

The duty reductions and exemptions, accompanied by low dial-up and leased line costs, would definitely take the country closer to the government target of 27 million Internet user base by 2010.

However, most of the ISPs already have their network in place and it would be difficult to assess if at all there would be any impact of yesterday's incentives, said one of the ISPs.

The government announced a number of tax incentives to the IT hardware sector, bringing down the excise duty on computers to eight per cent from 16 per cent and removing the four per cent special additional duty and customs duty on IT and electronics products.