Having enjoyed a tax holiday so far, IT and IT Enabled Services (ITES) may soon have to start paying sales tax for their products in Andhra Pradesh. The state, which is home to many top IT players like Satyam and Microsoft, is considering a proposal in this regard.The decision has come after a Supreme Court verdict allowing states to impose sales tax on IT products. It will apply to all IT services like software development and BPOs. According to government officials, the state is emulating its neighbours Karnataka and Tamil Nadu, which have already begun imposing sales tax. Hyderabad and its neighbouring areas have seen a boom in IT services, with many top international companies, including Google, Microsoft, Accenture and a large number of BPOs, based here.Minister for Commercial Taxes L Ramakrishna admitted that the Government is considering the proposal. “The Government is holding talks with representatives of the IT industry, and a decision will be taken after taking them into confidence,” he said. He added that neighbouring states like Karnataka and Tamil Nadu, which have also seen a huge growth in the IT sector, as well as Kerala, are already collecting taxes on IT exports. He said the state Government had earlier exempted software exports from sales tax to encourage the industry.Officials admitted that while the Government was as yet uncertain about the amount of revenue that could be earned from IT companies, Chief Minister Y S Rajasekhara Reddy has asked his officers to start compiling a list of IT companies in the state as the first step.IT exports from Andhra, mainly capital Hyderabad, during 2006-07 amounted to $4.5 billion, registering an annual growth of 48 per cent. The state’s share in the overall IT exports from India has gone up to 14 per cent, and it has set itself a target of crossing $6 billion during the current fiscal.Andhra Pradesh stands at the fourth position in terms of IT exports, after Karnataka, Maharashtra and Tamil Nadu, and the Government’s policies for IT have led to a large number of IT companies setting up shop here.
