The Indian IT industry is rife with expectations from the union budget, which is about to be announced shortly. The IT sector is one of the most important tax pillars for the government. and hence high hopes from budgetary policies, so what is it that IT's are demanding this budget.
The IT's are growing and they are going to contribute immensely to India’s overall development, but it is always a give and take relationship. If the government earns tax from the IT industry, the industry too expects benefits in return. And what time could be better to give them a return gift than the budget.
Like all years the IT fraternity is expecting a lot from the finance ministry this year too. They don’t have a comprehensive wish list but a compact and effective one.
The wish list has some prominent features, but there are things which are on top priority enlisting some of those:
Extending the STPI
STPI was a society set up by the Ministry of Information Technology in 1991 to increase software exports. The STPI scheme provided a USP of a 10-year income tax exemption for firms situated in software technology parks. The Indian IT sector is demanding an extension for this scheme pointing to the huge revenue it generates for the economy along with their contribution to the overall infrastructure in areas where they setup their units. This is applicable for SEZ’s which are away from the main cities and require additional investment by IT’s in form of infrastructure and transport. But experts see extension of the STPI as a bleak possibility. But they also think that SME’s and SMB’s need this tax benefit to empower them. The industry is also looking towards a minimum alternate tax rate being rolled back to 15%, but analysts feel that the government shall remain neutral on the issue. Increasing the STPI time would attract IT’s to setup units in India which currently due to non extension of STPI are shifting to other countries of the world.
Refund of Service Tax
Many IT’s are facing a grave problem of getting service tax back from the government on very lame excuses, like taking away the exporters tag from some company suddenly when it has been exporting for years. Therefore the tax assessment structure has to amended, and the legal procedure against such injustice should be coherently put together.
SOP’s for employment generation and increased expenditure on education, e-governance and defense sectors
Experts are of the opinion that the Indian IT has lost out to countries like Philippine and China, which necessitates skill development commission and the Government of India to give training grants to many small companies.Also looking at the number of employment opportunities IT’s pose, the government should give them whatever they want, IT professionals believe. The government just looks at the profits and the resulting tax from IT’s but they don’t look at what they are contributing. If they change their purview probably they will see reason to why the IT segment needs more tax benefits.
On the education front the IT industry needs more and more niche skill set which the government to a certain level is barring from happening by setting a limited number of seats in good institutions. They should raise the numbers bar, i.e. undertake Brownfield expansion in technical terms to facilitate larger number of students studying in institutions which excel. Other sectors like defense and e-governance would lead to overall development of India and shall also add to IT sectors profits, as these areas would need technical help to expand and grow.
Some other specific IT expectations of the budget are extension of tax holiday provisions for STPI units, choice of transition from STPI to SEZ units, exemption from MAT and DDT for SEZ setups and litigations for IT Industry for 10A/Transfer pricing provisions.
With the budget due very soon, it will be interesting to see how the government meets the IT sector’s expectations.
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