Union Budget Special-2010

Please don't rock the boat, Mr. FM

Atleast that's what the IT industry seems to be telling the government.

We at o3 have six major industry verticals, and over the next six days we'll take you through the most important and concise summary of what these sectors expect. We start our series with the IT sector.

Most IT leaders think the budget will maintain a status quo for their sector. No path breakers, no major boat rocking, no major sops. Yes, they do expect (and have lobbied hard) the STPI scheme (that offers a tax holiday to software companies) to be extended, and indications are that it will. In 2008, the scheme was given a fresh lease of life till 2010 and industry wants that benefit to extend until 2013 atleast.

Units in STPs and EOUs are not zero tax enterprises as they are subject to Minimum Alternative Tax at a rate of almost 17% on their book profits-something which units located in SEZs are not required to pay. Industry has been asking to create a level playing field for all and it seems likely that their pleas might be heard. While the FM is at it, one would expect him to address the anomaly relating to computation of exempt profit under Section 10AA of Income Tax Act relating to assessment years prior to 2010-11. In an earlier round it set right the process for following years but missed the preceding ones.

For a while now, the IT industry has faced issues of incidence of double taxation and litigation because of lack of distinction between package and customised software. Clarity on this matter would help the industry as a whole. Additionally including IT services so as to allow 100% cenvat credit on common input services for both taxable and non-taxable output services would come in very handy.

At a broad level, budget proposals would be expected to give some sort of guidance on the implementation of Goods and Services Tax and Direct Tax Code, so that uncertainties are removed.