Budget 2012: Extend tax incentives with MAT holiday for exporters, says E&Y

100% export oriented units and exporters located in Software Technology Parks were allowed tax holiday till the financial year 2010-11 with respect to profits from export of goods or computer software, under section 10A and section 10B of the Income-tax Act. However, the benefit lapsed with the end of the said year and was not extended by the previous year's Budget. The upcoming DTC does not propose to continue with these tax incentives.

Ernst & Young in its pre-budget wishlist has said that since expiry of tax benefit affects competitiveness of India as a global outsourcing destination given the impact of prevailing anti-outsourcing sentiment in some major countries as also the economic objective of earning foreign exchange and since the proposed DTC would anyway do away with this benefit, there is a case for revisiting the tax benefit.

The export sector, badly hit due to economic slowdown, needs fiscal support to tide over the crisis. Further, the tax holiday extension should come along with MAT holiday so as to allow exporters to effectively avail complete tax holiday in respect of export profits.