Thaindian News

Hyderabad, Feb 29 (IANS) Small and medium IT enterprises here are disappointed with the 2008-09 budget presented by Finance Minister P. Chidambaram Friday. “It does not have anything for the IT industry. It is disappointing for the small and medium enterprises, which had some expectation from the finance minister,” said Shakti Sagar, convenor, IT panel at Confederation of Indian Industry (CII), Andhra Pradesh.

The small and medium enterprises (SMEs) were expecting that the software technology park of India (STPI) scheme, which has been offering them various exemptions including 10-year income tax exemption for exports, would be extended beyond 2009, he said.

“We have not heard anything on STPI scheme and this means that it will not be extended,” he said.

Sagar fears this would hit hard the SMEs, which account 60 percent of the total IT industry.

Under the STPI scheme, the SMEs have been using the single-window system to get various approvals. Moreover, the companies registered with STPI can set up their units anywhere in the country.

If the STPI scheme is not extended, all the units currently located in STPI will have to shift to IT special economic zones (SEZs). Sagar said no SME could afford to move to SEZ.

The big IT companies are moving to SEZs to avail the various tax exemptions being offered by SEZs.

Non-extension of STPI scheme may hit 3,000 SMEs in Hyderabad alone. These units, with a turnover of less than Rs.10 million each, employ over 50,000 people.

Hyderabad Software Exporters’ Association (Hysea) feel that the SMEs would be badly hit as they spend 55 percent of their revenues on salaries. If the concessions are withdrawn, many units might be forced to shut down the operations.

Sagar, former president of Hysea, said the industry was expecting that the budget would remove the sunset clause under Section 10B of the Income Tax Act, under which no income tax exemption would be available for the exports by the 100 percent export-oriented units after March 2009.