Tuesday, April 15, 2008

STPI gets 1-yr extension

As a major relief to the infotech sector, the government has decided to extend the income tax benefit to the Software Technology Parks of India (STPI) for one more year till March-end 2010. A formal announcement towards this end is expected soon.

At the same time government has also expressed its determination to continue with SEZ policy, which has created 1.5 lakh jobs in the last two years and is likely to achieve a export figure of Rs 1,25,000 crore by 2008-09. SEZs have replaced EOUs and STPI.

On Friday, commerce minister Kamal Nath announced the extension of tax benefits to the export oriented units (EOUs) for one more year to 2009-10. When he was asked whether the benefit will also be extended for the companies operating from STPI, he said, however, at present the government has decided on EOUs only. But, a senior official in the commerce ministry said the government has also decided to extend the tax benefits to STPI. The government had earlier extended similar income tax benefits to companies operating from special economic zones (SEZs). But, the new rules do not allow the existing companies in STPI to shift operations to SEZs. This has put them at disadvantageous position vis-a-vis companies operating from SEZs. So, there was a demand for extension of tax benefits to companies functioning at STPI.

The tax benefits have given a huge boost to exports from EOUs and STPI. Exports from EOUs have already crossed Rs 1,25,000 crore mark in 2007-08. According to a commerce ministry official, the exports from STPI have also touched Rs 50,000 crore. Therefore, the source said both schemes are important for attaining a high export growth. He said SEZ is a new scheme, which replaces both EOUs and STPI schemes. But, for the existing companies operating under the EOUs and STPI schemes, the extension of the tax break is important. However, in the future, SEZs will be used as vehicles for industrialization and employment generation in the country. Nath said so far government has granted 453 formal approvals for setting up SEZs. He said SEZs currently provide employment to over 2.80 lakh people.

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