Mixed reaction from IT firms

The union budget evoked mixed reaction from the IT sector with companies welcoming a slew of measures like government’s support to Special Economic Zone,reduction in corporate surcharge from 10 per cent to 7.5 per cent and setting up of Technology Advisory Group for implementing all IT related projects. However,non-extension of tax holiday under Software Technology Park of India (STPI) scheme and increase in Minimum Alternative Tax (MAT) came as a setback,particularly for small and medium sized IT companies.

Ganesh Natarajan,vice chairman and CEO Zensar Technologies welcomed the budget.“Increase in MAT from 15% to 18% will impact the sector to some extent.  Introduction of Goods and Services Tax (GST) from April 2011 will have a positive impact in the industry. Also,proposal to create a Technology Advisory Group under Nandan Nilekani for implementing all IT related projects in the future reflect a new thinking,” he said. He said that there continues to be an expectation that during the course of the year the government will enable units operating under STPI to have some form of equalisation with SEZ Units.

“While large companies will be able to mitigate the tax pressures arising from the expiry of tax holiday by moving in SEZs,small and medium-sized companies,which form the bulk registered with STPI,may be impacted adversely as they do not have the size,scale and financial wherewithal to avail of the benefits of SEZ,” said Lakshmi Narayanan,vice chairman,Cognizant.

Kishor Patil,MD and CEO,KPIT Cummins Infosystem said the change in the business model that IT companies are looking forward is in line with government’s incentives for innovation. “From the IT perspective,I think it will create lot of opportunities for growth. Naturally there is some disappointment for a section in the SME sector,but I believe still there is one year when the benefits would be available and companies would make most of it. This would happen in some time and I believe the SEZ scheme would further evolve.”