Recession-hit IT sector wants fiscal benefits extended (Lead with corrections)

June 10th, 2009 - 12:05 am ICT by IANS  

Bangalore, June 9 (IANS) Battered by global meltdown and lower tech spending, the Indian IT industry is looking up to the new government for extension of fiscal benefits and relief from multiplicity and inequity of taxes to mitigate the recessionary impact and protectionist measures being adopted globally.
“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,” IT sector trade body Nasscom chairman Pramod Bhasin 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, provide parity with incentives under the special economic zone (SEZ) scheme and encourage the IT firms to move into tier-two and -three cities and towns.

Sections 10A/10B of the Income Tax Act (IT Act), 1961, were introduced a decade ago to exempt STPI-registered IT-ITeS 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 for its multiplier effect on the burgeoning IT industry.

“While India today has over a third of the world’s BPO global sourcing market, other competing countries have scaled up their BPO supportive incentives and initiatives. To remain the leader in the back-office operations worldwide, all stakeholders, including the government and industry need to collectively address 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 fringe benefit tax (FBT) on employees stock options (Esops).

Nasscom president and former head of HP India operations Som Mittal said the Indian IT-BPO industry was faced with multiple challenges, including decline in sourcing spend, price reductions, competition from other countries and the impact of economic slowdown.

“To address these challenges, the industry needs to find new avenues for growth and look at strategies to improve operational efficiency. Tapping verticals like manufacturing, healthcare and retail, expansion into new geographies and driving domestic market growth will be critical forward,” Mittal averred.

In return for the patronage, the trade body has expressed readiness to partner with the government for an inclusive economic growth of the country.

“With domain expertise in building global solutions and processes, the IT-BPO industry has the potential to transform the Indian subcontinent and play a major role in the development of key sectors, including education, healthcare, infrastructure, citizen services and financial inclusion, thereby creating employment opportunities to millions,” Mittal noted.

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 one million people.

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