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| STPI tax holiday extended |
| BS Reporter / Jul 07, 2009, 02:18 IST |
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Companies see opportunity in e-governance and smart card initiatives.
A one-year extension of software technology park of India (STPI) scheme, abolition of fringe benefit tax and removal of anomalies with regard to service tax and special economic zones were a clear positive for the information technology (IT) industry.
However, the market response to these announcements was not very positive. The BSE IT index had declined 2.74 per cent, with companies such as Tata Consultancy Services, Infosys and Wipro down by 2.50, 2.27 and 3.75 per cent, respectively. “The decision to extend fiscal benefits available to the industry under Section 10A/10B for one more year will help the industry mitigate the impact of the current economic environment and help India retain its competitiveness,” said Som Mittal, president, Nasscom.
Patni CFO Surjeet Singh said, “Of our turnover of Rs 600 crore, FBT constitutes at least Rs 1.5 crore. More than the cost, the whole process of mapping FBT is painful,” he added. “Removal of FBT and the reforms in indirect taxes is a major plus, allowing for stock-based compensation to be more effective. This calls for better attraction and retention of talent across all levels.”
The other positive for the industry was removing the anomaly with regard to the computation of profits arising from special economic zones (SEZ). The Budget proposes to amend the provisions of sub-section (7) of section 10AA of the Income Tax Act, from April 1, 2010, the deduction will be computed with reference to the total turnover of the firm.
Among the negatives were the increase in the rate of Minimum Alternate Tax (MAT) from 10 per cent to 15 per cent, along with a 5 per cent imposition of customs duty on set-top boxes. In 2006, for the smooth introduction of the conditional access system, the government had fully exempted set-top boxes from customs duty.
“MAT is a cash flow issue, the increase from 10 per cent to 15 per cent will not impact the P&L. It’s more like a advance tax payment besides the duration of this has also being increased from seven years to 10,” added Goenka.
The industry applauded the Budget on the focus given to the digitisation effort. Nasscom Chairman Pramod Bhasin said, “The industry will be keen to partner with the government in expanding e-governance initiatives, including modernisation of employment exchanges, the UIAD project, and smart cards for healthcare services so as to achieve enhanced governance. Increased capital outlays for education and infrastructure sectors will also address growth challenges that the country has faced.”
Suresh Senapaty, executive director and CFO, Wipro, said, “The Budget is not just aspirational from policy perspective, but also has the right execution focus. The proposed release of Direct Tax Code within 45 days and staying course for introduction of GST by April 1, 2010, are examples of the same.
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