Orissa IT firms want extension of income-tax sops

Urge chief minister to take up the matter with the central government.

Small and medium IT (information technology) enterprises of Orissa are objecting to the proposed withdrawal of income-tax benefits included in Sections 10-A and 10-B of the Software Technology Park (STP) Scheme from March 2009.

IT SMEs have urged Chief Minister Naveen Patnaik to take up the matter with the Centre. The term for providing income-tax benefits under the STP Scheme comes to an end in March 2009 and the Centre is actively considering a move to discontinue the facility. This is to bring IT majors within the tax net, as they have already started reaping good dividends from their businesses.

A debate over the issue is raging within the IT circle and the government, as different industrial lobbies continue to pressurise the Centre to go about with the move, on the grounds that other primary and secondary sectors should also get tax relief.

Bijay K Sahoo, president, Confederation of Information Technology Enterprises (CITE), has urged Patnaik to ask the Centre not to discontinue the STP scheme as it would not augur well for the sector, especially in a state which is still realising the potential of IT/ITeS sector.

"The information technology sector has just begun its journey in Orissa. The discontinuance of income-tax benefits under the STP scheme will be a major impediment for growth of small and medium enterprises," he said.

Orissa is witnessing the entry of international as well as national IT companies. IBM has already evinced interest in setting up office in the state. A red carpet welcome has been rolled out for Accenture and Cognizant.

National software majors like TCS, Infosys, Satyam have already set up facilities in the state and are likely to be followed by Wipro, MindTree, Hexaware and BPO Genpact.

The uncertainty over continuation of tax benefits would put expansion plans of many multinational companies on hold. "While the Special Economic Zone (SEZ) scheme would help to an extent, the dichotomy between the SEZ and STP schemes will create problems in the industry," Sahoo said.

Chief ministers of Andhra Pradesh and Karnataka have already approached Prime Minister Manmohan Singh seeking an extension of the STP Scheme.

CITE president said IT and ITeS SMEs in Orissa were in their infancy and needed constant support of the Centre and state. Out of the 139-odd companies registered with STPI in Orissa, 95 per cent are SMEs.

Orissa has worked out ambitious projections of achieving Rs 1,000 crore software exports in the coming years. At such a time, the withdrawal of income-tax benefits under the STP scheme would mar the state's forecasts.