No tax relief for new IT investment regions

NASSCOM BPO STRATEGY SUMMIT-2008

ITIRs, which are supposed to be bigger than special economic zones (SEZs), would facilitate co-existence of manufacturing plants, infrastructure and other support services required for the growth of the IT/ITeS and electronic hardware manufacturing units. In other words, an ITIR is geared at reducing the time a person spends on commuting from home to workplace as it houses office complexes, residential layouts, educational institutions, healthcare facilities and other civic amenities in the same location. A policy resolution to this effect was issued on May 28.

However, it comes with a rider in the form of a complete absence of tax incentives for setting up shop here.

"No new tax benefits will be offered in ITIRs," said Union IT Secretary Jainder Singh while speaking to the media on the sidelines of the Nasscom's summit here today.

The new ITIRs might include existing SEZs, industrial parks, export-oriented units or growth centres that have been duly notified by relevant central or state legislation. In such cases, however, tax benefits available to SEZs will stay, Singh said.

ITIRs are expected to push the country's total export of services from $31 billion in 2007 to over $60 billion by 2010 as these would address the critical issues of infrastructure shortcomings and increasing demand for office space. "ITIRs will boost exports and generate more employment, besides reducing pressure on the existing urban centres," Singh said.

An ITIR will be a specifically delineated region with a minimum area of around 40 sq km and while its internal infrastructure will be built and managed by a developer. External linkages will be provided by the government.

The role of the state governments is vital in setting up ITIRs, Singh said and added, "They will prepare proposals and notify the land that needs to be frozen for the ITIR."

The Centre will confine itself to giving clearances to ITIR developers and providing physical infrastructure such as highways, airports, rail and telecommunication services. While the Centre's Department of Information Technology will act as the nodal agency, a high-powered committee headed by cabinet secretary will scrutinise applications and monitor the implementation of these projects. Once the state governments forward the proposals, the Centre will take five-six months to clear the same, Singh added.

Nasscom Vice-Chairman and Genpact CEO Pramod Bhasin said, "We need IT investment hubs as the mere talk of cities such as Bangalore or Gurgaon stretching four times their size is quite frightening. As we build our businesses, we should start moving to small towns and that would ensure unprecedented growth."

However, a few BPO players felt that the ITIR policy, which provided for the merger of existing SEZs, lacked clarity on the tax benefits. "We cannot make out how the government will differentiate between those already availing tax benefits and the new players in ITIRs. Such ambiguity will probably result in a nexus between developers and bureaucrats."