IT & Telecom Sector Expectations From Budget 2009-10
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The run up to the budget has already seen hectic lobbying by Industry wide representatives. For the last few days, various bodies have met the finance minister and have been handling their wish lists earlier for benefits, to see a revival in their particular industry. The Indian IT sector is no different and NASSCOM, the IT industry body is also looking for some relief in terms of budgetary sops in the upcoming budget.
The Indian Tech sector has suffered mild setbacks from the Global Financial sector meltdown in the USA. A major chunk of clients comes from that sector. The heavy dollar appreciation has provided some relief for outsourcing biggies but even that has started to fade now.
The IT sector is gunning for some major reforms in terms of SEZ (Special Economic Zones) schemes, FBT (Fringe Benefit Tax) abolition, issues of Service tax levied on software and other major decisions such as the extension of the STPI (Software Technology Parks of India) scheme for the next five years. The budgetary thrust on E-governance and the education sector would also create massive domestic IT opportunities.
Major reforms :
STPI is an IT export oriented scheme established in 1991 for the development of the Indian IT sector and to boost IT exports. This scheme has been vital in making the Indian IT sector a viable option globally. Due to it, the IT companies have been getting relief in their tax obligations which has given them the competitive edge compared to their global peers.
The industry is playing for this scheme as it believes that if the scheme is abolished the industry may have to fork out more taxes loosing its competitive edge.This may not go down well with their global clientele who are looking at India IT sector for major cost–cutting measures.The scheme was initially set to lapse in March 2009 but was given a one-year breather in last union budget .
The software companies at the same time could continue to reap major rewards even if STPI is abolished few years down the line by pitching their efforts towards SEZ, and tax free export zones. Although it will take some years as currently many SEZ are facing countrywide agitation. A clear SEZ policy would make things easy for the IT sector as SEZ promises better infrastructure coupled with export oriented benefits. The SEZ scheme includes provision for full tax holiday benefits for units set up under the SEZ scheme.
The reduction in levied service tax on Softwares is also on the wishlist for Industry experts. FBT is also an important issue for the industry and if industry analysts are to be believed then the government might just do away with this tax.
The government’s renewed thrust on e-governance also creates IT opportunities worth billions of dollars. The upliftment of remote regions and the education sector as a whole would also come as a savior. All eyes would also be on telecom-related announcements pertaining to a formation of a special body for smooth implementation of telecom reforms.
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