The Indian IT and ITeS industry across all sectors on Friday felt let down by the national budget for 2008-09, finding little in it to boost growth prospects.
The National Association of Software and Services Companies (Nasscom), the leading IT industry lobby, indicated extreme disappoint as Finance Minister P. Chidambaram did not comment on extending the Software Technology Parks of India (STPI) scheme.
The scheme, offering tax sops for the industry, expires March 31, 2009.
"This (STPI scheme) is extremely critical for small enterprises and the BPO industry, as well as for expansion in tier 2 and tier 3 cities as they are unable to avail the benefits of the SEZ (special economic zone) scheme," said Nasscom.
Business Process Industry Association of India (BPIAI) president Sam Chopra said: "Extension of tax holidays for STPI units for 20 more years would have helped the fast growing domestic business process industry segment."
"From IT and telecom industry point of view, apart from few small indirect positives, it was a lacklustre budget," said Sourabh Kaushal, industry manager (South Asia and Middle East), Frost & Sullivan, a global consulting firm.
"We expected the finance minister to extend the STPI scheme and also to rationalise the fees, taxes and duties applicable on the telecom sector, but this was not even touched upon by the minister in his budget," Kaushal said.
The finance minister also proposed to increase the excise duty on packaged software from 8 percent to 12 percent to bring it on a par with customised software that will attract a service tax of 12 percent.
"The contribution of the IT industry to the buoyant Indian economy did not deserve excise enhancement on packaged software and imposition of service tax on custom software," added Kapil Dev Singh, country manager of IT intelligence and advisory firm IDC India.
Agreed Nasscom, which said: "The imposition of service tax of 12 percent on customised software and higher excise duty on packaged software could lead to increased cost of IT and could slow down the IT usage in the domestic sector. This impacts in particular, small and medium enterprises who have just started deploying IT."
"The budget is not delightful for the Indian BPO industries. While we say that the Indian domestic BPO segment will contribute $30 billion export opportunity by 2010 at a growth of 52 percent, we now need to re-look and reconsider it," said Chopra of BPIAI.
Cisco president and country manger (India and SAARC) Naresh Wadhwa said: "On the taxation front, the reduced tax burden will be a relief to individual tax players. It would have been a boon for the Indian industry had the same been applied to corporate taxes."
"I believe that there was a need to address some of the issues, especially in the context of the rupee appreciation," said Ravi Pandit, chairman and group CEO of KPIT Cummins.
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