Thursday, March 20, 2008

Extend STPI benefits to SMEs in IT sector : ASSOCHAM

by Jo Black

National Association of Small and Medium IT Companies (NASMEIT) and ASSOCHAM have called for extension of tax incentives under Software Technology Park of India (STPI) for IT industry, especially its SME segment from March 2009 onwards otherwise majority of 4500 small and medium size units will be forced to put their shutters down threatening the job of nearly 65% of the employees in IT and ITeS sector.

It may be mentioned here that the STPI benefits as per which the IT industry avails 25% of tax incentives are coming to an end from next fiscal and the ASSOCHAM had expected extension of this scheme in budget proposals for 2008-09 which did not happen.

The Chamber, therefore, has argued that the STPI scheme should be extended for another 7 years to enable IT industry as a whole and its SME branch in specific receives tax incentives to contribute substantially to national GDP.

The ASSOCHAM President, Mr. Venugopal N. Dhoot said that since by 2009, all medium and small IT companies now positioned in STPI parks will be loosing their substantial benefits so far being available to them by virtue of their aforesaid locations. With this, the industry will face its dooms day as in totality Indian IT industry including BPO, KPO, call centres are employing nearly 1 million of workforce.

Its contribution to Indian exports particularly of ITeS segment is measured at 20% and employs nearly 80% of total IT workforce need to be given further tax incentives under STPI as this sector faces the highest attrition rates.

While the top 100 firms would be contributing about 80% of total IT industries output of $ 38 billion by the end of 2008-09, considering both IT and ITeS service sector, the balance about 4,500 largely SME concerns contribute 20% of the sad output but employ almost 65% of total employment. It generates in other words the needed human resources, skill and technical expertise whose availability is ultimately hijacked by the large firms.

Mr. Dhoot added that as a result, SME sector not only suffer from a relatively high level of attrition but also becomes subject vulnerable to market and financial insecurities.

The withdrawal of tax incentives will not affect the billion dollar turnover of top 100 firms, it will on the other hand de-stabilise and throw out of gear the fragile SME sector, leading to their very survival issue and certainly would be stemming the further sustainable growth of IT industry of India in the coming years ahead.

Now that the globally Indian IT companies is coming face to fact with severe competition from central European countries like Brazil, Mexico and the other smaller Asiatic nations.

The Chamber has pointed out that it is high time that Govt. of India recognizes the fact that IT industry of India has a highly non homogenous structure and therefore, extension of STPI benefits to this industry are essential.

 

 

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