Karnataka, the leading exporter of software and IT services in the country, has continued to attract global majors to invest in the IT sector this fiscal.
Communications and Information Technology Minister A Raja on Wednesday warned that withdrawal of Income Tax holiday to Software Technology Parks (STP) in 2010-11 Budget will have 'devastating' effect. He said that the STP scheme should be modified to push growth in the IT sector.
Offshore projects accounted for over 70 per cent of the total software exports of Tamil Nadu during 2003-04, according to Software Technology Parks of India, Chennai.
Software companies registered with STPs in Haryana, UP, Delhi, West Bengal and Orissa have also posted strong growth.
The Union budget marks a watershed in the life of the Indian information technology services industry, akin to a family's coming of age rites of passage!
Although Infosys was given 50 acre at Rajarhat for setting up its first development centre in West Bengal, the firm was insisting on getting special economic zone status, which the state was not keen to consider due to political reasons.
Outperforming it's own projections, Karnataka has reported a 52 per cent jump in software exports at Rs 27,600 crore (Rs 276 billion) during 2004-2005 and set a target of Rs 35,000 crore (Rs 350 billion) for the current fiscal.
Extending STPI tax benefits beyond 2010 (it was extended by a year in 2009) has been a long-standing demand of the software sector.
The central government is likely to extend the Software Technology Parks of India (STPI) scheme beyond 2009 only to Indian information technology-enabled services/business process outsourcing (ITeS/BPO) firms. A proposal to this effect has been included in the 11th Five-Year Plan document, which will be put up for the approval of the National Development Council, headed by the prime minister, on December 19.
In a bid to provide reliable data connectivity to the software export companies in the East and North-Eastern India, the Software Technology Park of India will set up two more such parks in West Bengal and one in Manipur.
'If you align your ambition with India's rise, the peak of your careers will unfold alongside the peak of India's power.'
Union Minister for Communications and Information Technology, A Raja on Wednesday assured that the Indian IT sector that the ministry was doing its best to convince the government that the Software Technology Parks of India (STPI) scheme should be extended beyond 2009.
The Business Process Industry Association of India, an affiliated association of the Confederation of Indian Industry, in its pre-budget memorandum, has also demanded the extension for tax sops from the Software Technology Parks of India for at least 20 years.
Information Technology Small and Medium Enterprises of Orissa will approach the state government for the reimbursement of the basic salaries of technical personnel joining the sector for a period of 1-3 years.
The appreciation of the rupee, the dividend distribution tax and the hangover of the minimum alternate tax on information technology companies under the Software Technology Parks of India scheme have pulled the prices of IT stocks down.
IT major Infosys CEO and MD Kris Gopalakrishnan on Thursday expressed hope that the government would rationalise tax regime for the IT industry and extend the STP scheme to the medium and small sector in the Union Budget.
Posco ICT is the IT arm of South Korean steel giant Posco, which proposed to set up a 12 million-tonne steel plant near Paradip.
Rolta India plans to set up an information technology park in Kolkata at an investment of Rs 250 crore as part of its expansion plan.
Thirty foreign information technology and business process outsourcing firms have committed an investment of Rs 670 crore (Rs 6,700 million) in Bangalore during the first quarter of the current financial year.
The Centre expects its revenue loss on account of tax sops to export oriented units under Software Technology Parks of India (STPI) scheme to go up by over 21 per cent to Rs 11,501 crore (Rs 115.01 billion) this fiscal, over the previous financial year.
The data centre will act as a disaster recovery platform.
"If the tax holiday is withdrawn, STPIs will lose the level-playing field vis-a-vis special economic zones. We have recommended that the government either withdraw the tax holiday to SEZs or continue the incentive to IT companies," an official with knowledge of the deliberations told Business Standard. STPIs enjoy direct tax exemption under sections 10A and 10B of the Income-Tax Act, 1961. The benefits are scheduled to expire on March 31, 2009.
Even as Finance Minister P Chidambaram said that a final decision on expiry of tax benefits to export-oriented units and Software Technology Parks of India had not been taken yet, government sources indicated that an extension of the concessions was unlikely.
As auto major Mahindra & Mahindra (M&M) became the number two player in the retail passenger vehicle segment for the first time in February, powered by its new launches, the company is setting its sights on technology upgrades.
The move to extend the income tax benefits enjoyed by units covered by the Software Technology Parks of India Act and those set up in export oriented units by another year -- up to March 31, 2011 will benefit around 6,000 STPI units and 2,486 EoUs. In its budget-related wish list, the commerce ministry had recommended a three-year extension of the scheme, while the industry has been asking for five.
Among the other demands in its pre-Budget Memorandum 2008, the IT industry body has also suggested broadening the eligibility criteria for the large tax payer unit scheme, foreign tax credits, advance pricing agreements to provide upfront tax certainty, and refund of service tax paid on services utilised for export of computer software and BPO services.
Information technology firm Patni Computer Systems on Thursday said its earnings for a financial period could be affected
Though the Planning Commission favours imposition of a direct tax on Special Economic Zones (SEZs), it does not agree with the contention that these tax-free industrial enclaves are leading to revenue loss.
In a big-ticket measure, the direct tax benefits to 100 per cent export-oriented units (EoUs) have been extended till March 31, 2010. These benefits, available under Section 10 B of the Income Tax Act, were to expire on March 31, 2009.
Telecom and IT Minister A Raja today met Prime Minister Manmohan Singh to pitch for the extension of tax sops enjoyed by the IT firms for another three years.
Special economic zones dedicated to the infotech sector may receive a body blow if the tax exemptions provided to Software Technology Parks of India under Section 10(A) and 10(B) of the Income Tax Act are extended beyond March 31, 2009. According to a senior central government official, not more than half of the nearly 100 notified infotech SEZs will survive if the tax sops are extended.
Four companies have submitted applications for starting direct-to-home services in the country, Lok Sabha was informed on Thursday.
B V Naidu, Director of STPI Bangalore, on Wednesday said that in the last five months 82 firms have come to Bangalore and the value of investment has touched around Rs 700 crore.
