Indian software industry wants tax break restored

  • Reuters, PTI, Mumbai
  • |
  • Updated: Feb 25, 2003 12:02 IST

India's software services industry, which has been battling tougher market conditions, wants the government to restore a tax benefit in the annual budget on Friday.

"The government should honour the commitment of full exemption from taxes on export profits till 2010 since investments and business plans have been made on the basis of this commitment," Kiran Karnik, president of the National Association of Software and Service Companies (NASSCOM) said.

"This is all the more necessary as the global economic scenario continues to be bleak and the industry is fighting competition from emerging countries," he said.

Last year, the government reduced to 90 percent a full tax exemption on export profits announced in April 2000 under a 10-year tax holiday to encourage growth in the showcase sector.

The tax break applies to exports from technology parks and export zones where most of India's software firms are located.

These centres are now getting more business as overseas clients move work to cheaper locations to cut costs back home, but the billing rates are lower.

More savings on taxes would help as offshore work, or the work done in India as opposed to onsite jobs at a U.S. client's premises, increases. The share of offshore revenue is expected to go up to 58 percent of total export revenue this year, from 51 percent last year.

However, analysts feel the tax status is unlikely to be changed despite the lobbying by NASSCOM.

"Even though the industry has asked for a restoration of this facility, even maintaining status quo will be looked at positively," Cholamandalam Securities said in is budget preview.

The stock market is also not expecting any fireworks for the sector with the Bombay Stock Exchange Information Technology Index up less than one percent this month.

The software services industry, whose exports are growing at 30 percent a year, is projected to account for about 20 percent of total exports in the current year to March.

Exports, however, have come off the 60 percent plus growth seen in earlier years.


also read

RBI not done with rate cut, still in accommodative mode: Rajan

blog comments powered by Disqus