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Rediff.com  » Business » IT sector wants STPI benefits extended

IT sector wants STPI benefits extended

February 09, 2011 17:36 IST
With the Budget set to be announced on February 28, expectations of the industry and markets from the finance minister are quite high. Various industries and sectors, including the IT sector, expect the Budget to cover at least some of their wishes.

Rolta, a multinational software development and services company, too has a wish list, with the call to provide one-year extension to STPI (Software Technology Parks of India) benefits topping the agenda.

Chief Financial Officer Hiranya Ashar says he wants the Finance Ministry to extend the benefits under Section 10A of IT Act by at least a year.

"Given the inflation, growth and deficit problems, it will be interesting to see how the finance minister balances the Budget. He has little room to play on direct and indirect tax fronts, which are different from DTC (Direct Tax Code) and GST (Goods and Services Tax), as it will be difficult for him to make any fundamental changes in those areas. I think most of the proposals on direct taxes will be more or less a step towards DTC."

"From the IT Industry's perspective, there are 3 major items we expect in this budget. First is the extension of STPI benefits under section 10A.

"Though many companies and industry associations have recommended STPI benefits to continue for a longer period and to be treated at par with SEZ (Special Economic Zones) benefits, I think at least one year extension in this Budget will be extremely helpful.

"The issue about continuance of STPI benefits under DTC can be taken up separately when DTC is discussed and passed by the parliament. Second is the rate at which MAT (Minimum Alternative Tax) is levied.

"The MAT regime started with a tax rate of 7.5 per cent of book profits, and now this rate has been increased to a whopping 20 per cent. This rate is certainly too high and has a big impact on cash flow of all companies, including on non-IT sector companies.

"We want this rate to be cut to a reasonable rate of between 15-17 per cent, but if government wants to retain 20 per cent rate for MAT then the name of this tax should be changed to "Maximum Alternate Tax".

"Third item is on the indirect tax side where there is still no clarity on how software should be taxed, whether it is services or goods and whether service tax or VAT (Value Added Tax) is applicable?

"This issue certainly gets addressed with the introduction of GST, however, since there are lot of uncertainties around GST implementation, immediate clarity from the government on this issue will be highly appreciated by the industry."

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