IT firms may move to SEZs with no STPI extension

Special Economic Zones (SEZs) may become favourites of the IT firms for new investment as alternative for tax sops, with the government deciding to put curtains on the Software Technology Parks of India (STPI) scheme.

Finance Minister Pranab Mukherjee in his Budget, has not not announced extension of STPI beyond March 2011, under which the IT companies get tax incentives.

For new investment, the IT firms may now shift to the SEZs where the incentives are available for new investment.

"End to this scheme (STPI) could mean a direct demand filip to SEZs which would then be the only tax haven for IT/ITeS companies," real estate consultant DTZ Research said in a report.

"The SEZ option is always there," Commerce and Industry Minister Anand Sharma said.

SEZs, which provide tax sops for 15 years, are already popular among the software industry. More than 325 of the 574 formally approved SEZs are in the IT/ITeS sector.

Prodding the IT and ITeS firms to invest in the SEZs, Director General of Export Promotion Council for SEZs and EOUs L B Singhal said: "In the next decade, the SEZ scheme is going to play important role in the country's exports and employment generation for all the sectors, including software industry."