ESC seeks continuation of tax sops for software firms
September, 08th 2007
The Electronics and Computer Software Export Promotion Council (ESC) on Friday sought continuation of tax sops beyond 2009 for the sector.
"Tax benefits under Section 10A and 10B of the Income Tax Act are helping the Indian software and services firms in achieving competitive edge. Withdrawal of these benefits will be adversely affecting the head start advantage of Indian firms especially the SMEs," ESC Chairman Sanjiv Narayan said.
These tax sops for software exporters are to end in March 2009, but companies have been demanding that these incentives should continue for another five years to help the industry remain globally competitive. ESC says about 10 per cent of the SMEs in IT sector could shut shop if tax sops are withdrawn.
"The SMEs should be provided tax sops for five years to fix their roots deeply in the market," Narayan added. He said if these tax sops are withdrawn, small and medium-sized IT companies would have to re-locate to special economic zones, which would be very expensive for them.
Explaining the impact if SMEs moved to SEZs, ESC executive director D K Sarin said their cost in terms of rental, manpower and land would increase.
Commenting on the impact of Rupee appreciation on software exports, Sarin said: "The appreciation has shaved off the margins of IT companies substantially that have been operating in a thin band of 10-15 per cent."
The government has set a export target of $ 50 billion by 2008 from IT and ITes sector. Out of this, about $ 46 billion is targeted from software and services and about $ four billion from hardware segment, Narayan said.