Say introduction of service tax is causing a heavy burden

IT entrepreneurs from Visakhapatnam on Saturday asked the Ministry of Communications and IT to unveil a slew of incentives and tax concessions to help tide over the slowdown hitting the growth of the sector.

During a visit of Union Secretary, Department of Electronics and IT S. Satyanarayana to the IT Park at Rushikonda, the entrepreneurs sought his intervention to accelerate growth in IT field and help them tide over slowdown.

They asked him to reduce current account deficit (CAD) and introduce a law for resale of licences to another consumer if not needed by the buyer. To ensure cash flow, they wanted tax concessions, which were hitting them hard.

Vizag Development Council president P. Vishnukumar Raju and vice-president O. Naresh Kumar in a representation submitted to Mr. Satyanarayana expressed their resentment over levying of Minimum Alternate Tax (MAT) on IT units located in the Special Economic Zones. As IT units were suffering for want of cash flow, they requested him to impose a moratorium on MAT on units existing in SEZ for 10 years.

They said the introduction of service tax at 12.3 per cent was causing a heavy burden on cost of operations making them globally uncompetitive. For every invoice raised, they were being forced to pay the service tax though the clients were not absorbing it.

With Google, Microsoft, Dell and other international players opening their offices in India, they were making payments in rupee and income tax and service tax were applicable to them.

Tax deducted at source

On tax deduction at source, they said TDS should be restricted to 2.2 per cent to IT units functional in the SEZ. They also asked Mr. Satyanarayana to ensure refund of TDS amount within six months of filing the returns.

During the discussions, they mentioned that IT exports from Hyderabad was accounting for 97 per cent of total exports from Andhra Pradesh.

Exports from AP were to the tune of Rs. 64,000 crore and Hyderabad had Rs. 62,000 crore and the rest of the State had only Rs. 1,800 crore of exports. Visakhapatnam provides 22,000 jobs whereas Hyderabad had 3.5 lakh direct and 10 lakh indirect jobs.

Rushikonda IT Park Association (RITPA) in a separate representation requested immediate denotification of SEZ and proactive policies from Government of India to improve IT business in tier two and three cities in Andhra.

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