In order to promote investment in information technology/information technology enabled services (IT/ITeS) industry and overall development of the sector as well as to increase penetration in tier-II, tier-III and other small cities in the country, the Software Technology Parks of India (STPI), an autonomous society under department of IT, is mulling non-profit linked incentive scheme for the IT/ITeS industry.
This new scheme would compensate the STPI scheme partially. According to STPI scheme, there was 100 per cent tax exemption on profits under Section 10A of Income Tax Act, given to STPI units which expired on March 31.
To formulate the scheme, it has hired Deloitte Touche Tohmatsu India Pvt Ltd as consultant. The consultant has already submitted its draft to the STPI and it is under consideration. Speaking to Business Standard, STPI, director general, Omkar Rai said, "We are working on the modalities on the recommendations submitted by the consultant.”
“The consultant has proposed that there should be income tax benefits on the basis of profitability. According to the proposal there should be some rebate on income tax say about 50 per cent which the entrepreneur are liable to pay. Later on it would be reimbursed to the entrepreneur. Similarly, if the unit is running into losses, the incentive would be based on employment generation," Rai said.
He added that the draft is at its initial stage and it may take a year to be notified.
“It is premature to say the kind of amount needed for reimbursement but it may be to the tune of Rs . 5000 crore.”
According to Omkar Rai, there are 8,500 units registered with STPI across India. Out of the total, 6,000 units are engaged in exports. Further, the total exports from STPI units is to the tune of Rs 2 lakh crore. He added only the exporting units situated in tier-II and tier-III cities would be entitled to these benefits. He further added that this year, STPI is expecting flat growth in terms of exports.
It is pertinent to mention here that STPI scheme expired on March 31. The discontinuation of such benefit is likely to impact the growth of IT SMEs.
Further this withdrawal has also resulted in investors investing in other offshore locations on account of increase in cost of services.
In this regard, STPI is exploring options for providing other indirect Non-Profit Linked Incentives to the industry to promote investment and overall development of the sector as well as increase penetration in Tier-II, Tier-III and other small cities in the country.
