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To offer VAT exemption to IT SMEs
March, 02nd 2010

As part of its endeavour to promote SMEs (Small and Medium Enterprises) in the IT sector in Orissa, the state IT department plans to offer a rent subsidy of Rs 10 per sq ft to these units.

Sources close to the state IT department said, plans are also afoot to offer other enabling measures like exemption of electricity duties and value added tax (VAT) for IT SMEs.

These measures would be included in the new ICT (Information and Communication Technologies) policy of the state government.

Earlier, SMEs had sought complete exemption from VAT on hardware procurement by the units, investment subsidy and employment subsidy as well as plug and play office space for upcoming units. VAT on IT hardware currently ranges from 4 per cent to 12.5 per cent.

SMEs had demanded the introduction of a focused ICT (information and communication technology) policy which provides an investment subsidy of 15-20 per cent on a capital cost of up to Rs 20 lakh for upcoming IT units.

IT SMEs have also called for other facilities like provision of cheap land, uninterrupted supply of power and the setting up of more Software Technology Parks of India (STPI) centres.

Responding to the concerns of these units, the state government has decided to set up two more STPI centres at Balasore and Sambalpur.

The first private software technology park JSS Software Technology Park was inaugurated in the city earlier this month. Bijoy K Sahoo, chairman of the JSS Group, said, Two IT SMEs with a headcount of 110 employees have already started operating out of the JSS Software Technology Park. These SMEs would add 100 people to their workforce by June.

On its part, the state IT department is going ahead with its plan to set up the second tower of the Orissa Computer Application Centre (OCAC) to offer ready to use office space to. The second OCAC tower is set to be operational by June this year and it involves an investment of Rs 40 crore.

It may be noted that the development in the IT sector in the state has been skewed in favour of the large units.

Presently, the share of the large IT units in the implementation of the e-governance projects in the state is more than ten times that of SMEs. The anomaly was even more pronounced in terms of land allotment.

As against 230 acres of land allotted to the large IT players in the state, the SMEs have been allotted only 30 acres. While the 10 large IT units have a workforce of around 4,000, there are 57 IT SMEs which employ 6,000 people.

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