Sunday, May 11, 2008

Selective extension of STPI to smaller towns mooted

While it is a bygone decision that a new authorities at the Centre will take a phone call on extending the Software Technology Rosa Parks of Republic Of India (STPI) strategy beyond the 12 calendar months respite given by finance curate Phosphorus Chidambaram, the National Association of Software and Services Companies (Nasscom) is proposing a selective extension of the strategy to littler towns.

Nasscom president Som Mittal told deoxyribonucleic acid Money, "The extension of the STPI strategy have raised the liquor of the industry and given us clip to believe through the alternatives."


Kicked off in 1991, the STPI strategy have been a major subscriber to India's success as a planetary outsourcing hub over the past two decades. Today, it do some 8,000 IT units of measurement more competitory by providing direct taxation freedom under subdivisions 10A and 10B of the Income Tax Act, 1961.

The strategy was to run out on March 31, 2009, before the finance curate late last calendar month extended it up to March 31, 2010.

According to Mittal, the current particular economical zone (SEZ) strategy is encouraging companies to travel to the bigger cities. However, the policy is not particularly tailored to the little and medium sized companies.

The big companies are preparing to travel to their sole SEZs to derive the benefits of 100% taxation vacation for the first five years, 50% for the adjacent five old age and 50% of the ploughed-back profits for the last five years. According to some estimates, IT companies will be able to do at least 100 bits per second higher borders by executing work out of SEZs anywhere in India. These participants will be able to endure the storm, though many of them are not ready yet and will take at least one-two old age more.

It is the little and medium companies without the wherewithal to put up their ain SEZs that volition suffer.

Extending the STPI strategy to littler towns could assist here.

Significantly, earlier last week, Nasscom released a joint survey with astatine Kearney, surveying the top-50 adjacent finishes for IT-BPO trading operations in the country, apart from the existent top seven metros.

The study studies the chances available in these metropolises for attracting investings from the sector and a roadmap to accomplish unvarying economical development in the country.

According to an analysis by Citigroup analysts Surendra Goyal and Hitesh Shah, while Grade two participants will likely profit more than from the STPI extension, among the Grade Iodine companies, Satyam and HCL are put to profit the most.

Ironically, Satyam and HCL are the least prepared for the SEZ scheme and are expecting up to 15-20% of their grosses from new SEZs in FY09.

Had the STPI strategy not been extended, they were looking at an expected taxation charge per unit (ETR) of over 22%. With the extension, their ETRs will be in the mid-teens.

Wipro and Infosys benefit much less by virtuousness of being manner ahead of the others in SEZ preparedness as also in having the peak figure of STPI units of measurement that complete 10 old age in FY10. The ETR for TCS, for instance, will fall by 6% inch FY09. Given the planetary economical scenario, it is the little participant who necessitates the assistance.


"We will work out assorted options for this," Mittal asserted.

The vertex industry anticipates the industry to turn by 22-24% this year, compared with the earlier outlook of a 28% growth. But, the overall mark of $60 billion remains unchanged. "Even if we turn 21-22%, we should be able to accomplish it," said Mittal.

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