The Group of Technology Companies (GTECH), a strategic grouping of IT firms in Kerala, has urged the Union Government to extend the Software Technology Parks of India (STPI) scheme by a few more years for small and medium enterprises.
Addressing reporters, GTech president V.K.Mathews and Secretary Anoop Ambika said Kerala would have to bear the brunt if the Centre decided to wind up the scheme by March 2011. “Over 200 small and medium enterprises in the state would lose the existing tax benefit that is being reinvested for development of infrastructure and generating fresh employment. Many of these companies will be forced to shut shop”.
Mr.Mathews said the STPI scheme was introduced to promote exports from India. “IT companies made good use of the scheme to improve efficiency, productivity and profits”. He said extending the scheme to Tier 2 and Tier 3 cities alone would help to broadbase development across the country.
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Mr.Anoop said the decision to wind up the STPI scheme was driven solely by the compulsion to step up tax revenue. “The Government should realise that 50 per cent of the expenses of a small company are spent on the payroll, a portion of which goes back to the exchequer as taxes”.
Mr.Mathews said winding up the STPI scheme would force companies to move out to Special Economic Zones. This, he observed, would result in poor utilisation of the existing infrastructure.
Smaller companies beginning to make profit will now find themselves having to pay tax. This will affect their capacity for reinvestment.
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GTech is seeking the Prime Minister’s intervention to extend the STPI scheme. One of the problems in mobilising industry associations for the cause is that many of the former STPI beneficiaries have grown out of the ambit of the scheme to become major players.
GTech proposes extending the STPI scheme to SMEs so that they continue to benefit from tax incentives.