Indian information technology (IT) industry has urged the government to continue tax breaks under the Software Technology Parks of India (STPI) scheme, an issue which failed to find a mention in Finance Minister Pranab Mukherjee’s Budget speech on Friday. IT industry has also been disappointed by increase in minimum alternate tax (MAT) that would put extra burden on small companies.

Demanding extension of STPI scheme beyond March 31, 2011, National Association of Software and Service Companies (Nasscom) President Som Mittal said: “There was also no move towards announcing parity of incentives between the STPI and the SEZ scheme which is again necessary for small companies and development of Tier 2 and Tier 3 cities… we will engage with the government and through the Ministry of IT to represent for an equitable benefit to the SME sector.” Indian software export industry is set to touch $48.7 billion this fiscal and it is currently not taxed.

Mr. Mittal further said: “While overall the Budget is positive, we are disappointed with the increase in MAT which will be a burden on small and medium businesses who are still struggling with the impact of the global recession.” He, however, said the enhanced deduction on R&D investment would propel greater thrust on innovation and IP creation helping India to realise its vision of being the global R&D services hub. Similarly, the clarification on duty applicability for pre-packaged software as well as service tax refunds would provide the much necessary simplification of policies,” he added.

Similarly, Manufacturers Association for Information Technology (MAIT) Executive Director Vinnie Mehta: “We are glad that the Finance Minister has unveiled the roadmap for GST. Unification of the rate on excise duty and the service tax has been a step in the right direction towards implementation of the GST. This will help mitigate the issue of CENVAT overflow for manufacture of IT products in the country.”

Welcoming exemption of special additional duty (SAD) on pre-packaged goods for retail, Mr. Mehta said: “To sustain hardware manufacturing, it is critical that SAD on the input components be exempted as well.” He also welcomed customs duty concessions on machinery and equipment for setting up photovoltaic and solar thermal power generating units.

“We also welcome the setting up of the Technology Advisory Group under the chairmanship of Nandan Nilekani for monitoring effective IT implementation in projects of national eminence. Timely completion of IT implementation in government projects is not only critical to the growth and development of the country but also essential for delivering services to the citizens,” he added.

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