'Extend tax sops to IT sector'

NEW DELHI: Auditing experts have favoured extension of tax sops being enjoyed by the IT-ITeS sector so far to help the industry retain its competitiveness. In its Budget wishlist for the IT industry, auditing firm PwC said, “with rising rupee leading to realisation dips in export consignments, the government can consider extending the tax holiday for a longer time-frame in the forthcoming Budget for SMEs in the IT-ITeS sector irrespective of their location of operations.” Toeing the line, KPMG said the sector is hoping that the stimulus package would continue at least for another six months.

since the industry is not yet fully recovered from the slowdown. The sunset clause under Sections 10A and 10B of the Income-Tax Act gives tax holiday to IT/BPO companies operating under the STPI scheme, which expires in 2011. “The extension of tax holiday for STPI/EoU units by one year provided the timely succour to the industry which was reeling under tight margins, increased competition and rupee appreciation,” KPMG said.

While software export from the country is projected to grow by 15 per cent in the coming fiscal, it needs continued Government support to achieve this objective, KPMG said, adding in the current fiscal, IT and ITeS exports are expected to grow at 5.5 per cent only.

The continuity of tax holiday for STPI/EoU units by two-three years is of prime importance now, especially for SMEs. Whilst IT companies are no more zero-tax companies due to introduction of MAT, the removal of the tax holiday would hit their post-tax margins.

Patni Computers chief financial officer Surjeet Singh said, “in terms of the IT industry, we would like to suggest extension of tax holiday referring to Section 10(A). The expiry of this provision coupled with the anti-outsourcing legislation in the US could make India an uncompetitive offshoring destination.”

Industry body Nasscom has submitted its Budget wishlist to the Government, wherein it recommended that the software technology parks of India initiatives be at par with special economic zone schemes. “The SEZ anomaly should be removed retrospectively,” it said.

It also called for higher tax incentives for the BPO sector, besides introduction of a legal cell for litigation.