Recession-hit IT sector seeks extension of fiscal benefits

June 9th, 2009 - 10:39 pm ICT by IANS  

Bangalore, June 9 (IANS) Battered by the global meltdown, the Indian IT industry is looking up to the new government for extension of fiscal benefits and relief from multiplicity of taxes.
“Extension of fiscal benefits like 10A/10B sections for the tech industry under the Software Technology Parks of India (STPI) scheme is imperative to sustain the growth momentum and compete in the global market,” Pramod Bhasin, president of the National Association of Software and Services Companies (Nasscom), told reporters here Tuesday.

In pre-budget consultations, the trade body told Finance Minister Pranab Mukherjee recently that the tax benefits would facilitate even small and medium enterprises (SMEs) to maintain growth and encourage IT firms to move into tier II and III cities and towns.

Sections 10A/10B of the Income Tax Act (IT Act), 1961 were introduced a decade ago to exempt STPI-registered IT and IT-enabled services firms from paying taxes on their profit from export of software and services. The 10-year scheme was extended by a year to fiscal 2009.

“To remain the leader in back-office operations worldwide, all stakeholders, including the government and industry, need to collectively address the challenges such as lack of public services, cost of training and infrastructure issues,” Bhasin asserted.

The trade body has also sought an end to duplicity of indirect taxes for packaged software, provide clarity in policies for service tax refunds, develop uniform approach on transfer pricing and amend FBT (fringe benefit tax) on employees stock options.

Former Nasscom president Som Mittal said the Indian IT-BPO (business process outsourcing) industry was faced with multiple challenges, including decline in sourcing spend, price reductions, competition from other countries and the impact of the slowdown.

“To address these challenges, the industry needs to find new avenues for growth and look at strategies to improve operational efficiency,” Mittal averred.

Earlier, kick-starting the 11th annual Nasscom BPO strategy summit-2009, Bhasin said the sector had a phenomenal growth over the past seven-eight years till the global meltdown in the second half of fiscal 2009.

In spite of the tough economic environment, the BPO sector is projected to grow by 15 percent in fiscal 2010 and remain a net hirer. In fiscal 2009, BPO exports grew by 17.5 percent to $14.7 billion. The sector employs about 10 lakh people.

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