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Budget silent on STPI

Kris Gopalakrishnan

CHENNAI: Even as the IT, business process outsourcing (BPO) units and the National Association of Software and Service Companies (Nasscom) have termed the Union Budget as ‘populist,’ they are disappointed that there is no mention about the extension of the Software Technology Parks of India (STPI) scheme.

The industry feels that it is extremely critical for small enterprises and the BPO industry, for expansion in Tier-II and Tier-III cities as they are unable to avail themselves of the benefits of the special economic zone (SEZ) scheme. The STPI benefits are available till March 31, 2009.

Lakshmi Narayanan

Lakshmi Narayanan, Vice-Chairman, Cognizant, said “If only the tax holiday under the STPI scheme was extended beyond March 31, 2009, it would have been a big shot-in-the-arm for the industry, primarily because the IT industry has been consistently ploughing its earnings back into the business, resulting in higher investment and growth.”

Mr. Lakshmi Narayanan feels that the small and medium sized companies would be the ones hit hard.

These companies constituted a vital part of the IT ecosystem as they operated in specific niche areas, invested aggressively in innovation and also took the industry to Tier-II and Tier-III cities ahead of the rest of the industry.

This segment of the industry deserved preferential treatment since it was from this category that the next big top-tier offshore player could emerge in the next five to ten years.

Ravi Viswanathan, Vice-President, Tata Consultancy Services, says the imposition of service tax of 12 per cent on customised software and higher excise duty on packaged software can lead to increased cost of IT and can slow down IT usage in the domestic sector.

According to Nasscom, the IT-BPO industry is talent and skill-intensive and thrust on primary and higher education and skill building initiatives is appreciated.

Sarva Shiksha Abhiyan, increased allocations for higher education and the creation of the Skill Development Mission will ensure constant supply of employable workforce.

N. Ramachandran, Chief Financial Officer, iGATE Global Solutions, said with the Government announcing schemes for establishing broadband, Internet-enabled common service centres in rural areas and State-wide Area Networks (SWAN) would help spread IT to smaller districts.

Kris Gopalakrishnan, CEO and Managing Director, Infosys Technologies, feels that the budget has not been positive for the IT industry. Smaller companies should have been given tax relief to counter the impact of appreciating rupee.

The increase in excise duty for packaged software will lead to increased piracy.

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