No industry has received more incentives than IT and BPO and it should not have been necessary to consider more. The end of income tax exemption for export profits, which is due on March 31, 2009, is in accordance with the direction of economic reform set in motion in 1991-92. All industries were similarly eligible for income tax exemption under Section 80 HHC of the Income Tax Act but the benefit was phased out by March 31, 2005. It would therefore seem in the fitness of things to allow the phase out of the benefit for the IT and BPO industry with effect from the date on which it is due. However, as explained earlier, the introduction of the income tax benefit under the SEZ Act has queered the pitch and if the concession is not extended for STPIs a non-level playing field would be created after March 31, 2009, between STPI units, which will not get income tax benefits and units within the SEZs, which will get such benefits. Additionally the withdrawal of STPI benefits will have more adverse effect on the SMEs. When they need to expand, unlike the larger companies, SMEs do not have the capacity to build or occupy independent SEZ units, and will have to settle for the sub-optimal (and likely more expensive) alternative of renting parts of a large multi-product SEZ. It is imperative for the Government to address this issue at the earliest.
