The $76-billion software industry is hopeful that the government will extend the Software Technology Parks of India (STPI) scheme till the proposed Direct Taxes Code (DTC) is implemented.
However, at the Nasscom Leadership Summit 2011, industry leaders were seen bracing for the worst. The STPI scheme, extended in the last Budget, expires on March 2011 and industry insiders feel it would not be extended further.
“We have requested the STPI scheme be extended till the DTC comes into effect because we need some incentives from the government to encourage people to come and invest, especially in small and medium companies,” said Nasscom President Som Mittal.
STPI, which offers tax exemption to export-oriented units on profits under Section 10A and Section 10B of the Income Tax Act, was extended by one year till March 2011.
“Government must look at stimulating the formation of small companies, stimulating entrepreneurship. It is through entrepreneurship that you can get new products and technologies to marketplace. So, we need to continue to support formation of small companies. May be through tax breaks for the first couple of years or tax breaks till a certain threshold revenue is reached for smaller companies,” said Kumar Parakala, chief operating officer (head of IT advisory, Global head of sourcing), KPMG.
“I would ideally liked to have GST implemented that is expected to streamline taxes, both indirect and direct making it for easy for companies to get clarity on matters concerning service and corporate taxations,” reasoned Kris Gopalakrishnan, CEO of Infosys.
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Phiroz Vandrevala, head, global corporate affairs and executive director, Tata Consultancy Services said: “Both STPI and SEZ schemes have been around for a long time now and we see a smooth transition happening in case STPI scheme is not extended.” The industry seem to agree that a little increase in taxes, post the STPI regime, won’t really impact margins of the larger Indian IT companies.
Veterans like Saurabh Srivastava, chairman of CA Technologies India, said: “We hope that government would extend some sops to smaller IT companies, especially those who are not in SEZs. The inability to extend the tax holiday after March 2011 might even slow down expansion plans of several Indian IT companies.”
The government had introduced the SEZ policy, under which the first five years offer 100 per cent and the subsequent five years 50 per cent tax exemption. If the STPI was not extended, tax rates for Indian IT companies could go up 25-30 per cent from about 20 per cent now.