Budget Wishlist | "Ending tax holidays for IT will see India losing out"

Budget Wishlist | Ending tax holidays for IT will see India losing out

Bangalore: A senior IT industry official on Wednesday warned that if tax holidays for the sector under the STPI (Software Technology Parks of India) scheme was not extended beyond 2009, it could lead to India ‘losing out’ to competitors.

Seeking to make a strong case for continuation of the 10 year scheme introduced in 1999, Member of Infosys Board, T V Mohandas Pai said the STPI scheme has ‘benefitted´ the country like no other since Independence, and the IT industry has created two million jobs.

“The IT industry gives the largest number of jobs for young Indians - 430,000 jobs (current annual estimation) for the educated middle class. This is a very large lobby. It’s a vocal class", he told reporters in response to questions.

“If all of us start looking at (greener) pastures outside like creating jobs in place like (the) Philippines, China, Eastern Europe, Mexico and some other countries, there will be challenges (in India)", Pai said.

There is a five-year tax holiday scheme on the lines of STPI in the Philippines, three year one in China and five year one in Mexico, while there are tax holidays for the IT industry in Vietnam as well. “India should not lose out".

Pai argued that the tax benefits enjoyed by the IT companies under the STPI scheme is not “very large".

According to him, while IT companies benefit to the tune of $1.3 billion to $1.4 billion a year, the Government gets back $1.5 billion in the form of taxes paid by employees in the IT sector.

“It (IT industry) is a very, very important industry and policy makers need to be cautious when they look at this issue (STPI scheme)", Pai said.