IT industry worried over non-extension of STPI

The software industry on Friday hit out at the government for increasing the minimum alternate tax and for ignoring the industry’s plea for extending STPI scheme, which would have continued to give tax breaks.

The Software Technology Parks of India (STPI) scheme would have continued to give tax breaks to their export revenues beyond 2011 onwards.

“The Finance Minister did not announce any extension of the STPI scheme which we were expecting. We still have one more year to go as the extension will expire in March 2011. We would take up the issue again,” Nasscom President Som Mittal said. Indian software export industry is set to touch USD 48.7 billion this fiscal and it is currently not taxed.

Most of the stock market listed IT companies reacted negatively to the government’s inaction on the crucial STPI scheme, pulling the sectoral index down marginally on a day when the overall BSE index Sensex was up by 175 points.

Companies such as TCS, Infosys and Tech Mahindra closed marginally lower than their previous day’s close. Only Wipro was up slightly (0.98 per cent) at Rs. 676.70.

Mittal, however, said it may not hit the industry yet but the association would demand some cushion for the small and medium IT companies who would be exposed without STPI benefit.

However, the country’s sixth largest software exporter Patni Computers said, “Budget has not addressed IT Industry’s demand for extension of tax holiday under STPI scheme which is a significant negative for the Industry“.

The increase of MAT to 18 per cent from 15 is also a big dampener, said companies and experts.