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BPIAI Pre Budget Session 2008-09
CII, Conference Room , 249 F, Sector 18, Udyog Vihar, Gurgaon
Monday, 11 February 1400 hrs
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The 2007 Budget has spelt dismay, rather than delight for the Indian IT-BPO industries. The budget had drawn more frowns than cheers from the BPO sector. A quick study of the Budget indicates the concern areas that are likely to have a detrimental impact on the growth of the Indian IT-BPO industries.
The Minus side of the Budget 2007-08
- IT companies brought under the Tax Net with the levy of FBT on ESOPs
- A 2.5 percent increase in Dividend distribution tax
- No attractive deals for individual tax payers (including the IT people)
- New education cess (of one percent), and add on service Tax for houses being used as commercial office premises had been levied
- Increase in CTC per employee for the employers on account of above moves
The IT sector has enjoyed tax breaks for over 30 years, the BPO industry being 5 years old has had very little time to benefit from this though the industry employees near about 3 lakh people in Gurgaon alone. The IT sector might be mature enough to sustain without tax breaks, but taking away tax sops will adversely affect the BPOs. The Goods Exporters are getting tax sops for over 40 years, IT getting STPI and other tax sops for over 20 years as well.
Tax sops from the Software Technology Parks of India (STPI) will also disappear for these companies and this might make investors avoid India and instead invest in other offshore locations like China, Sri Lanka and Philippines. And this is why most believe, that the government stands to lose more in terms of indirect taxes than it will gain from taking away the tax breaks.
Industry Pre Budget Memorandum (2008-09):
- Decoupling of BPOs from the IT
- The Abolition of Service Tax, FBT, ESOP, MAT as taxable perk.
- A need for a Special Department or Ministry in the Government to look after the BPO Industry.
- Continuation of 10A tax holiday for at least another five years.
- Extension of the STPI tax holiday beyond 2009 for a period of 10 years or more that is coterminous with the current IT-SEZ scheme.
- Change in the norm of area notified for the SEZ regime (1 mn sq ft built up area in a single location), which is not feasible for SME companies
- Assessing officers to avoid absurd interpretations of the term Export turnover U/s Sec10B and avoid using any and all pretexts to disallow some or all part of export profits from software sector which are otherwise exempt u/10B.
- Removal of ambiguities related to explanations of Section 10B that are used out of context by assessing officers and without proper application
It is against this backdrop that BPIAI has organized a Pre – budget session on Monday, 11 February at CII, Gurgaon office from 1400 hrs.
I am writing to request you to personally participate in the session. Please do confirm your participation and that of your CFO (Chief Financial Officer) to the undersigned:
Ranashree Sengar at ranashree.sengar@ciionline.org (mobile: 9899600865)
I look forward to receiving your confirmation.
Kind regards,
Sam Chopra
President
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