With the tax exemption having expired since last one year, the Software Technology Parks of India (STPI) membership in Gujarat has come down drastically from 200 to 80. Yet, software exports from the state has risen to Rs 1,500 crore this year, up by 25 per cent since last year.
According to Ajay Sharma, the expiry of tax exemption benefit last year forced almost all the non-serious IT players in the state to shut shop. "Only those who had a long term vision of doing business in Gujarat have continued their operations. Moreover, they have been making efforts to expand their business which has led to rise in IT exports in Gujarat," said Sharma.
IT firms were offered Income Tax as well as local tax exemption for setting up units under the STPI scheme. However, the central government did away with the I-T exemption on March 31, 2011 amidst much protests from small and medium IT firms.
"The STPI scheme offered two types of benefits, namely I-T exemption and local tax exemption like excise and sales. While the former got expired in March last year, many IT companies failed to take advantage of the latter, leading to closure of their businesses," said Rajan Vasa, CMD, Contech BPO Services Ltd. According to Vasa, the IT exports have risen on the back of existing players expanding their product portfolio.
"For instance, many companies who were only in e-commerce are now also into mobile applications. Also, IT companies in Gujarat have now moved further away from their dependence on the US and have added newer markets like Japan, Africa, Australia and Europe which have pushed software exports up further," Vasa added.
However, the rise in IT exports in Gujarat have nothing to do with rupee appreciation, say industry players.
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"Rupee has been on the run against dollar since sometime now. Hence, software exports are not rising due to rupee appreciation. It has more to do with existing players expanding their overseas market network as well as addition of newer players," said Jaimin Shah, former president of Gujarat Electronics and Software Industries Association (GESIA). Resultantly, the IT industry in Gujarat itself has seen its membership increase from 1,000-odd IT players last year to over 1,200 this year.
Meanwhile, Vasa said that the industry has also seen increased participation from expats. "More and more expats are coming back to Gujarat to set up IT units. Since they are well connected with the countries they come from, they start exporting immediately from Gujarat," Vasa added.