Nasscom seeks extension of STPI scheme by one year

The National Association of Software and Services companies (Nasscom), the apex body of IT and ITES industry, has requested the Centre to extend the Software Technology Parks of India (STPI) scheme for one year and also consider incentives based on location or innovation for employees of the small and medium enterprises (SMEs).

Nasscom expects the IT industry may witness attrition levels and average salary hikes of 10-12% next year.

As the STPI scheme benefits are coming to an end this month, incentives are required to keep the momentum, Nasscom President Som Mittal told reporters here.

"We had requested the government that as you are ending the benefit of STPI by March, 2011 and starting the DTC (Direct Tax Code) in 2012, so for one year there is no coverage. So at least for one year you extend (STPI scheme).

It could be employment-based incentive, location-based incentive, and innovation-based incentive to encourage the SME," Mittal said.

Mittal was in the city to participate in Nasscom's first Global Captive Conclave 2011, which began yesterday.

Nasscom, which requested the government to rethink on the imposition of Minimum Alternate Tax (MAT) on companies that were set up in SEZs, is hopeful of a positive outcome.

Mittal said the topic will come up in the Parliament during the discussion on budget.

"The SEZ scheme is eligible till 2014. Any unit that comes up till 2014 will be eligible (for MAT exemption). Any unit that comes up till 2014, there should not be MAT after that you put the MAT.

So we have a continuity of sovereign promise. You said you will do it. So people (companies) have invested. Don't change the rules," he said.

The governments' reluctance to extend the STPI schemes beyond this year did not go well with the $76 billion industry.

Besides, the Finance Minister in the 2011-12 budget brought SEZs under MAT regime. The introduction of 18.5% MAT with an effective rate of about 20% is set to negate the impact of profit linked tax exemptions under DTC.

To a query on the attrition levels in the industry, Mittal said, the IT sector witnessed a downward trend of 3-4%.

"We cannot generalise the figure. As a dynamic industry 10-12% is good attrition level. Even if it is anywhere between 10-15% it is manageable one. It had exceeded 20% in some cases.

Salary hike is linked to this. For the year 2011-12 our expectation on salary hike will be in the range of 10 to 12%," he added.

Mittal was confident that the industry would touch $75 billion as expected in this year and see a growth of 16-18% in FY12.

"The IT and ITeS export revenues would touch $60 billion this year and domestic business would touch $15 billion," he said.