The Indian IT sector has been going through a tumultuous phase since the onset of the economic slowdown. Battered by the recessionary pressures, the business of technology firms has suffered a tremendous setback over the past 1 year. Indian IT SMEs are now seeking relief from the newly-elected United Progressive Alliance (UPA) government.
Small and mid-sized firms in the software and services industry are hoping for adequate financial support and tax-exemptions from the government in order to kick-start their business.
Cry for government aid
The Indian IT SME segment is demanding proactive measures from the government in order to tide over the downturn blues. Extension of fiscal benefits like 10A/10B sections under the Software Technology Parks of India (STPI) scheme tops the proposal made by software industry associations including the National Association of Computer Software and Services Companies (NASSCOM) in the pre-budget consultations to the Finance Minister Pranab Mukherjee.
“Funding support, export-incentives and rationalisation of tax structure are required to help the sector sustain the growth momentum and compete in the global market,” said T Bhowmick, Director of Sunic, a mid-sized IT firm in Gurgaon.
Change in fringe benefit tax on employee stock options and tax benefits are expected to facilitate growth of SMEs since it would ease the mounting cost burden and help them maintain their margin. Experts also believe initiative of tax exemption under the STPI scheme will encourage more start-ups and SMEs to set up firms in Tier II and III cities and towns.
The IT SMEs are also seeking rapid implementation of more pro-growth policies to help the business process outsourcing and IT-enabled services sector ride out the recessionary storm.
“It is imperative for the government to formulate policies that will help the IT industry face the multiple challenges including pricing pressures, dip in sourcing spends, liquidity crunch and competition from other countries,” commented R Mohanty, Head of IT systems administration, Phoenix IT Solution Companies, a mid-sized technology firm in Hyderabad.
Abolishing the multiple tax system, clarity in policies for service tax refunds and adoption of a uniform approach on transfer pricing and ensuring adequate credit availability is likely to see the IT sector recover quickly. Besides meeting industry demands and addressing the challenges, the industry needs to find alternative markets and tap emerging growth opportunities and look at strategies to improve operational efficiency.
David Parks is a well known author and has written articles on Trade Shows in india, B2B Portal, Trade Leads, suppliers, Manufactures and many other subjects.
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