New Delhi: The high growing Indian IT sector, which has been reeling under pressure due to rupee appreciation, may again hit a roadblock if the government does not extend the Software Technology Parks of India (STPI) scheme beyond 2009.
“About 1,500 small and mid-size firms would have to shut their shops if the government does not extend STPI scheme beyond 2009,” said D K Sareen, executive director, Electronics and Computer Software Export Promotion Council.
The industry is already battling with incremental rise in the value of rupee against dollar, which has impacted their bottomlines by up to 15%, he said. Besides, there are fears of a recession in the world’s largest economy which could adversely impact the the industry here.
ESC has about 5,000 IT and ITeS companies as its members. About 60% of the total exports comes from just 100 firms.
The STPI scheme, which provides tax holiday for export- oriented IT/ITeS firms, would expire by the end of 2008-09.
Under the scheme, 100% tax deduction on profits under Section 10A and Section 10B of the Income Tax Act is available only up to 31 March, 2009. The companies will, thereafter, have to pay tax at an estimated rate of 33.99% in the absence of these deductions.
About 84% of the total exports comes from two markets, the US and the UK, Sareen said.
The companies need to identify other markets such as Latin America, Africa and Asean countries, to reduce their dependence on the US market.
Japan, which is the third largest IT & ITeS market in the world, only accounts for 4% of the total exports from India.