The Union budget has evoked a mixed response from the information technology (IT) industry in Gujarat.
While steps like removal of fringe benefit taxes (FBT) and increased expenditure on education through IT have been appreciated, extension of Software Technology Parks of India (STPI) benefits by just one year has made some companies in Gujarat uncomfortable.
To know why STPI benefits are important, one need to understand that the IT firms in Gujarat are still young and small in scale. So, they have not completed 10 years and are still eligible for tax benefits and moreover, they are not big enough to make the STPI to SEZ transition easily. To top it all, except Raheja’s IT/ITeS special economic zone, no other tax haven is ready to house IT companies so far.
Commenting on STPI extension till March 30, 2011, a local entrepreneur said, “Extension of exemptions by one more year is a move that is more emotional than of actual benefit.”
The president of Gujarat Electronics and Software Industries (Gesia) and MD of Jayatama Informatics, Nirav Shah, said, “The Centre has apparently taken a middle path looking at the slowdown. Eventually, all exporting IT firms will have to shift to SEZs, but extension will give them time to prepare for it.”
“On the other hand, with FBT gone, companies will definitely benefit as there is lot of travelling for on-site project execution and other purposes. Also, the government’s spending of Rs900 crore for education using IT and similar projects will help companies
with domestic focus,” he said, adding that the government should, however, had planned IT clusters in states like Gujarat, which it did not.
The executive director and co-founder, Azure Knowledge Corporation, Jay Ruparel said, “The budget is more political than expected, despite the UPA having a comfortable majority. Still uncertainty prevails over what is to be done, regarding STPI-SEZ situation. A small company needs at least 18 months to make the transition. Moreover, no SEZ is ready right now. In addition, increase in MAT from 10% to 15% has come as a severe blow. It was not the right time for such decision.”
Voices were also raised in the industry that government has not done much to encourage the domestic IT consumption.
“Philippines’ IT exports are already more than half of India’s exports. STPI was a visionary step, but with growing international competition, we need a clear vision for next 10-15 years. However, there is no long term policy in the offing. In addition, the outlay under the export guarantee scheme should have been increased,” Ruparel added.
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