The Hindu : Business : Nasscom resents tax on renting

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Thursday, Mar 01, 2007
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Nasscom resents tax on renting

A. Saye Sekhar

"Will impact IT industry profitability'

HYDERABAD: The National Association of Software and Service Companies (Nasscom) Chairman, and CEO of Satyam Group, B. Ramalainga Raju, has described the budget as "disappointing."

Mr. Raju told reporters over a teleconference here on Wednesday that the introduction of minimum alternate tax (MAT) would "negatively impact" most companies.

However, the IT industry hoped that the government would consider extension of `sunset clause' benefits under Software Technology Parks of India (STPI), beyond 2009.

Nasscom would appeal to the government to reconsider some of its decisions, as the opportunities of IT companies were global in nature, said Mr. Raju.

Application of service tax on lease/rentals would impact the profitability of IT industry, as it was dependent on infrastructure like office spaces and residential accommodation, he said.

Mr. Raju described the decision to bring ESOPs (employees stock options) under fringe benefit tax (FBT) as a "retrograde step from the point of view of employees as well as companies."

This would result in increased attrition level and become very difficult for companies to retain quality manpower.

"This is a clear disincentive for companies introducing ESOPs in future,"Mr. Raju added.

He said the government was apparently viewing the IT industry as attaining certain level of maturity, "which was very subjective," and that it did not require any support.

At a time when many developing countries like China, Egypt, Malaysia, Philippines, and Eastern European nations were offering facilities on a platter to IT companies to lure investments, the decisions of the government were discouraging.

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