STPIs, 100% EOUs may enjoy tax holiday for 3 more years

NEW DELHI: The government plans to extend the tax concessions enjoyed by technology parks and 100% export-oriented units (EOUs) beyond March
2010, a government official said.

The commerce department and the IT ministry are jointly lobbying for a three-year extension of the tax concessions offered to the software & technology parks of India (STPI) to ensure a steady flow of investments into the sector. A case is also being made for the continuation of sops to 100% EOUs to make the country’s exports more competitive in the global market.

“We are hoping that the extension of sops to both STPIs and 100% EOUs will be made in the interim Budget,” said the official who asked not to be named. The interim Budget will be presented on February 16. The tax sops given to both STPIs and 100% EOUs were to end on March 31, 2009. Last year, the government extended the concession for another year to ensure that both STPIs and EOUs continued to enjoy tax benefits even if the interim Budget failed to provide an extension.

While there is ample time for giving another extension to the sops, the government wants to make room for it in this Budget to ensure continuity, the official said. “We have learnt from EOUs and STPIs that fresh investments have dried up since the tax benefits are slated to be removed. We want the extension in sops to be announced early so that it gives confidence to investors to carry on with their investment plans,” the official added.

Units in STPIs and 100% EOUs enjoy tax exemption on profits under section 10A and 10B of the Income-Tax Act. While section 10A of the Act provides for deduction of profits and gains derived by an enterprise from the export of any good and computer software, section 10B provides for deduction of profits and gains derived by a 100% EOU from the export of any good or computer software.

The global recession has started taking a toll on exports with total exports falling 22% in January 2009. Exports of IT and software services too are witnessing a slowdown. Nasscom has brought down its growth projection for software and services exports from 21-24% to 16-17%.