Tax holiday extension short, IT sector unhappy

expectations of the IT industry, but the extension of STPI (Software Technology Parks of India) tax holiday by a year has been a disappointment for most IT firms.

S Gopalakrishnan, CEO and Managing Director of Infosys Technologies says, "For the IT industry, extension of 10A/10B exemptions by one more year is a move that is more emotional than of actual benefit since most STPs would have come out of the tax holidays."

However, the IT industry body Nasscom has a different take on this. It is positive that the reforms and measures announced in the budget will be beneficial to the industry. Som Mittal, President, Nasscom said, "The Finance Minister's decision to extend fiscal benefits available to the industry under Section 10A/10B for one year will help the industry mitigate the impact of the current economic environment and help India retain its competitiveness."

In fact most IT firms seem to be happy with other measures like, abolition of the Fringe Benefit Tax (FBT) and service tax refund mechanism based on self-certification or by a Chartered Accountant. The allocation made for infrastructure and education too are positive signs. The allocation for highways has been stepped up by 23 percent and there has been an increase in the allocation for education, including the fact that new IITs are to be set up. Vinod Krishnan, Regional Manager, VMware says, "Abolition of Fringe Benefit Tax is a welcome move; this will help us to retain and attract more talent."

The raise in tax exemption limit too has been looked at as beneficial. Vignesh Hebbar, Associate Vice President, Marlabs Software India said, "Marginally raising the upper limit for Income Tax (IT) exemption would help employees to save more and make some investment. With the core thrust on the budget being, taking the GDP growth to nine percent, this would help all round spending on social sectors and infrastructure development."

There were also other discrepancies in the budget. As S Ramadorai, CEO and MD, TCS says, "The Finance Minister may have missed a trick by not unleashing a wide-ranging e-governance program to extract more economic efficiencies." The government's renewed thrust on e-governance could have created IT opportunities worth billions of dollars. The ICT Industry was also looking for more support from the new government. "We had recommended a 100 percent depreciation on financing of IT equipments which was not included. On taxation aspect, the excise/CVD exemption is unclear as it was not stated whether VAT is included in this or not. The Government has also put a huge focus on R&D and it is good to see continuity of fiscal stimuli by the Government.

Various projects and schemes announced by Government, will require increased role of Information Technology for eg. - the UID project. It is critical now to implement these projects at the earliest," said Ajai Chowdhry, CEO and Chairman, HCL Infosystems.

The hype of the budget under the new Finance Minister, ultimately, leaves many areas untouched that could have influenced the growth of the IT sector.