Raja hints at extending tax sops in STPI plan

Updated on Feb 13, 2008 10:37 PM IST
The IT minister said there can be a possibility of extending the tax holiday for Indian cos after 2009, reports Venkatesh Ganesh.
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Hindustan Times | ByVenkatesh Ganesh, Mumbai

There could yet be some good news for Indian IT companies that have lately been hurt by an appreciating rupee against the dollar and growing fears of a recession in the US.

Thiru A Raja, Minister for Communciations and IT, said that there could be a possibility of extending the tax holiday for Indian companies after 2009. In 1999, the government had granted a 10-year tax holiday to IT companies located in software technology parks across India.

Raja comments, which appeared to be a move at facilitating the expansion of the Indian IT and BPO sector, came during his inaugural address at Nasscom 2008. "The recommendations made by Nasscom and the feedback received from the IT and BPO companies on the continuation of the STPI scheme and its fiscal incentives have been treated on a priority basis," he said.

He added that the ICT ministry has taken up the issue with the prime minister recognising the fact that small and medium enterprises and startup companies would struggle to survive. IT and BPO companies have been growing at an average of 40 per cent since 2002, though recent growth has stagnated primarily due to a stronger rupee against the dollar apart from the twin issues of high wages and the lack of availability of a skilled workforce.

Raja said the issue of talent could be addressed by companies in Tier II and III towns that needed development to act as a feeder for IT and BPO companies.

"We should continuously focus on modern Greenfield integrated hi-tech cities that are run independently and managed by their own authorities," he said, adding that IT and BPO companies should increase their focus on the domestic market, which registered revenues of $23.2 billion in 2007.

Currently, the IT and BPO sectors employ 2 million people and according to a Nasscom-McKinsey study in 2005, the Indian IT sector could face a shortage of 0.5 million workers.
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