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| Modified STPI scheme to be placed before Cabinet |
| Kirtika Suneja / New Delhi Jun 18, 2010, 00:40 IST |
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The modified Software Technology Parks of India (STPI) scheme, which aims at treating units present in software technology parks (STPs) and special economic zones (SEZs) on a par, will be presented before the Union Cabinet by the end of the month.
The income-tax holiday, which the STPIs enjoy, is set to expire in March 2011. Section 10AA of the Income Tax Act provides 100 per cent deduction on income of SEZ units from exports for a period of five years, but computes it with reference to the total turnover of the holding company. As a result, companies with units in SEZs as well as outside them used to get lower tax benefits.
“The modified scheme, which aims to rectify this disparity, will be placed before a Committee of Secretaries before it is presented to the Cabinet in a month’s time,” said an official privy to the development. The modified STPI scheme will give the same benefits and a level playing field to units which are operating as SEZs but are not physically present in the zones.
When contacted, R Chandrashekhar, secretary, Department of Information Technology, said: “The Ministry of Communications and Information Technology had set up a task force whose recommendations will be going to the Committee of Secretaries. This issue has been taken up separately with the Prime Minister and finance minister and is under consideration. It needs to be approved at the appropriate level.” He did not give any details.
The task force had recommended that the STPI scheme favoured only big companies in Tier I cities and, hence, the private developers set these parks in big cities.
The STPI scheme was launched in 1991 and gave a flat 10-year tax exemption to the units. These STPI centres act as ‘single-window’ in providing services to the software exporters and incubation infrastructure to small and medium enterprises. The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment contain duty-free import, domestic procurement of goods for development, operation and maintenance of SEZ units.
Besides the 100 per cent tax exemption for the first five years, the SEZ units also enjoy a tax benefit of 50 per cent for the next five years and 50 per cent of the ‘ploughed back’ profit from exports for the next five years.
There are 132 IT-ITeS SEZs across the country that have come under the umbrella of STPI.
“Our view is that the big companies have the benefits of moving to the SEZs, but small and medium companies can’t benefit. We need to take note of the virtual character of the industry. It is not desirable to have separate sets of incentives to the same industry,” added Chandrashekhar.
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