Indian IT and BPO industry gets a shot in the arm as Govt. extends STPI tax holiday scheme

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"We hope that the government takes a re-look at the whole scheme of tax holiday and formulates a more stable longer term tax incentive structure that can be one of the enablers for the Indian IT sector to move up the value chain and attain the next level of dominance in the world market," said N. Ramachandran, CFO of iGATE Global Solutions.

However, "Something is better than nothing, every little counts," said Ganesh Natarajan, chairman, NASSCOM.

"It provides an interim relief to the industry. This will especially benefit small and medium software and BPO (business process outsourcing) firms," added NASSCOM's president, Mittal. "It is very important that the industry gets support at this stage. Had the scheme not been extended, tax expenses for smaller firms could have been as high as 5 to 6 percent of their revenues in 2010."

"This benefit will also gives us time to come up with other workable and acceptable options for the future, beyond 2010," the trade body said in a statement.

According to S. Mahalingam, CFO, Tata Consultancy Services (TCS), "The IT industry has delivered enormous benefits to the Indian Economy over the past few decades and the confidence reposed in this industry when the STPI scheme was originally formulated has been fully met." The IT industry accounts for 5.4 percent of India's gross domestic product (GDP).

The extension would strengthen the IT industry and "hopefully, pave the way for further extensions," he said.

"This is a good move and would benefit the small and medium sized companies (SMEs) who are finding it difficult to move into SEZ space due to lack of availability of SEZ space as well as high rental costs. Most of the larger companies are already pursuing their SEZ plans aggressively. This move will enable them to enjoy the tax benefits further for a period of one year on their revenues derived from their existing STP operations," said V. Balakrishnan, CFO, Infosys Technologies.

Agrees Ravi Pandit, chairman and group CEO of KPIT Cummins Infosystems. "Even for one year it is good as it will correct the demand-supply situation in the Special Economic Zones," Pandit said, adding the rush of IT firms for SEZs, in anticipation of the expiry of the STPI scheme will ease.

The extended time window would help the IT firms plan their migration to SEZs better, he said.

"The IT industry welcomes this move, which was on expected lines. This allows companies to prepare for the sunset exemption clause much better given the current tougher global environment," said Suresh Senpaty, CFO, Wipro.

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