CIOIN

Today when Pranab Mukherjee, our Finance Minister, delivers the budget speech, the IT industry will be glued in to figure out the impact his words will have on the tax benefits being enjoyed by them. In the last Union Budget, the government had extended tax benefits for units in STPI by another year till March 2011. Units set up in these parks are eligible for a 10-year tax holiday if they are notified before March 2012 and become operational before March 2014.

Also read Union Budget 2011: What CIOs Want

“Even as the DTC is expected to be introduced from April 01, 2012, it would anyway do away with the tax holiday; thus the benefit could be extended by one year. Large IT companies would be able to alleviate the tax burden arising from the expiry of tax holiday by moving into SEZs,” Sanketh Arouje, Leader – Economic Analysis Group, Dun & Bradstreet India.

“However, SMBs, which form the bulk of the companies registered with STPI, will be severely affected, as they are still struggling in the post recession period and do not have the financial resources to face this challenge,” adds Arouje.

Most of the members of the industry echo a similar sentiment and Surjeet Singh, Chief Financial Officer, Patni affirms, “We urge the government to extend the tax benefits under the STPI scheme for another year or two to empower growth of small and medium sized companies. The exemptions under 10(A) and 10(B) were unaddressed in last year’s Union Budget and we are hopeful that they are adequately addressed this year.”

The rare contrasting view comes from Arup Roy, Principal Research Analyst, Gartner. He says, “In terms of taxes and other sops (STPI and the debate thereof), I think the Indian IT industry has developed its own momentum now and can sustain on its own.” According to him, in order to boost entrepreneurship, small scale providers perhaps they should look at Tierization of companies and those falling in the lowest tier should be the ones to enjoy those tax and other benefits.

Recently, the government has also made several investments in areas such as the computerization of its various departments and investing in programs such as NeGP and the UID project. “It is expected that the government will continue to invest in these kinds of projects which will help the domestic market grow in a sustainable manner,” says Arouje from Dun & Bradstreet India.

The industry is gung ho about this aspect and is egging the government to do more on this front. “Investment in technology for the government sector needs to see increased attention. While the process has been initiated, provisions are slow and the sector holds a huge potential,” says Ashank Desai, Co-Founder, Mastek.

Atul K Nishar, Chairman, Hexaware Technologies is also eager to see such a move and says, “Rapid adoption of technology by the various government and private organizations that are the stakeholders in these initiatives (Right to Information Act, the NREGA, the UID project or the Right to Education Act) can lead to acceleration of implementation, not just in letter but also in spirit.” If the forthcoming budget can increase allocation for these schemes and create focused provisions to encourage greater adoption of technology by the stakeholders of these initiatives, it would be a very desirable step, feels Nishar.

Also read Indian Union Budget 2011: CIOs Eyeing Indirect Impact