Economy

FM Extends Tax break for SME IT Companies

budget

Small and Medium Sized IT Companies (including Vishwak) in India have been enjoying Government of India Tax break under 10A scheme (managed by STPI) whereby for their investments on new plant and machinery they get a 10-year Income Tax holiday. A few years back the government set the sunset for the tax break as 31st March 2009. The idea was to encourage movement into the new China like SEZ (Special Economic Zones) whereby more investments and job creations will be done. Unfortunately, the SEZ Promoters are only selling spaces in them to large IT companies – the minimum you can buy is 100,000 sq. feet which are way above for any SME to afford. So this was perceived by many industry bodies as an anti-SME move. On top of this, in the last 12-18 months, Rupee has been appreciating against the US Dollars by over 10-12% literally wiping off the margins for SMEs. Lastly, the Finance Minister in his last budget imposed a 10% (approx) MAT (Minimum Alternate Tax) as well. So the industry was looking forward to the FM to extend some support in the budget but he didn’t do it. But on the request of the IT Ministry and PM Office, the FM has yesterday announced for the extension of the STPI (Software Technology Parks of India) scheme for another 1 year till 31st March 2009. This certainly is a welcome move and I thank the Government for the same.

Now it is the turn of the industry to use the extension time to become self-sustained by increasing productivity and introducing innovation, they should stop looking for perennial tax breaks.