The Hindu Business Line : Raja for extending tax holiday for IT cos

The industry has been demanding continuation of tax concessions under the Software Technology Parks of India scheme beyond the sunset clause of 2009.

Our Bureau

New Delhi, Aug 10 The IT and Communications Minister, Mr A. Raja, is understood to have supported the Indian IT industry’s long-standing demand for extension of the tax holiday beyond 2009. Mr Raja has written to the Finance Minister seeking a “healthy discussion” and also pitched for the tax holiday up to 2019.

Sources said that the Minister felt that an extension would ensure continuous flow of investments in the IT and BPO industry, and fuel the growth in the hi-tech sector which is targeting revenues of $49-50 billion in FY08.

The Indian industry has been demanding continuation of tax concessions under the Software Technology Parks of India (STPI) scheme beyond the sunset clause of 2009. Under the scheme, IT firms housed in a software technology park are exempted from paying tax on their export revenue.

Mr Kiran Karnik, President of software association Nasscom, speaking at a recent BPO summit in Bangalore, had pointed out that extension of tax incentives would partially offset the losses being caused by the rising rupee.

The rupee has risen about nine per cent against the dollar since January 1 this year. That, compounded by wage inflation and visa costs, has put pressure on the IT software and services companies.

However, Finance Minister in this year’s Budget did not mention about extending the scheme and, in fact, brought the IT industry under the ambit of Minimum Alternate Tax (MAT).

“Given the intense competition, countries like China, the Philippines and South Africa are wooing IT and BPO companies by offering attractive incentives. The extension of the tax holiday will ensure that India remains competitive in the global IT services map. Moreover, the STPI scheme has fostered entrepreneurship in the sector, as units do not have to be physically located in a specific facility as is the case with SEZs,” Mr Karnik argues.

While the IT industry has been seeking extension of the STPI scheme, the debate gathered momentum after the announcement of the SEZ scheme under which units located within an SEZ would enjoy tax benefits.

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