Govt considers new incentive scheme for units in STPIs

After the tax holiday under sections 10A and 10B of the software technology parks of India (STPIs) ended earlier this year, the government is looking at coming up with another incentive scheme for new companies.

To this end the government has appointed Deloitte Tohmatsu as consultant to come up with a report dealing with the intricacies that will define the new incentive regime, said Omkar Rai, director general, STPI.

“Deloitte has been appointed to help create the shape that the new incentive scheme will take. The idea is to aid the dispersal of the IT (information technology) industry in the tier-II and III cities through a new incentive regime,” Rai said.

The STPI offered tax exemption scheme which benefited export-oriented units under Section 10A and Section 10B of the Income Tax Act ended in March this year. The industry has, since then demanded a tax benefit scheme be put in place, especially for new organisations.

Rai told reporters on the sidelines of the ICT East Summit, that the report from Deloitte is expected within two months, after which work would begin on putting final touches to the budgetary nuances. Also, under the new scheme the tax benefits would most likely be instituted on reimbursement basis, while the burden of taxation benefits would be taken care of by the central government itself.

“While the STPI Act continues, the sun has set on the tax benefits companies would get under section 10A and 10B. We are mulling a new taxation scheme under which benefits will be extended on reimbursement basis,” Rai said.

Incidentally, most large companies anticipating the end of the tax holiday under the STPI regime has moved campuses out of STPI and into special economic zones (SEZs).

This also meant that the major burden of taxation is being borne by smaller companies without the means to move out entire operations from STPI zones.