Strongly pitching for small and medium enterprises, Nasscom, on Monday, asked the union finance ministry to continue with Software Technology Park of India (STPI) scheme which is a “major contributor” to the Indian economy by allowing SMEs to set up their business at concession rates.

The STPI scheme has proven to be a major contributor to the growth of Indian economy that has resulted into IT-BPO export of $ 32 billion.  The small and medium units that have come up due to the SPTI scheme can not now be expected to move from their present base to other locations due to higher cost of operations.

 Smaller companies are finding it difficult to rent special economic zone (SEZ) space as enough capacity is not always available in the right location. Also the SEZ space comes with high rental, which the SMEs can not afford, the apex software agency has told the finance ministry.

LTU scheme

Nasscom argues that the STPI scheme should be extended to BPO sector, which is moving to Tier-2 and Tier-3 cities with barely any SEZ in the vicinity.  But it agrees that BPOs don’t require tax holidays.
 Mr Som Mittal, who will replace Mr Kiran Karnik in Nasscom in two weeks, is expected to lobby with the government for continuation of STPI scheme till the next Union Budget.

 Rupee appreciation in the US market, which had hit the export-driven Indian IT industry hard, has also necessitated the need to continue with STPI as companies can save valuable cash because of tax exemptions.
In addition, Nasscom has appealed to Union Finance Minister P Chidambaram to broaden the eligibility criteria for large tax payer unit (LTU) scheme.

Since TDS on salaries and on vendors is a statutory obligation cast on companies to ensure efficient tax collections, the eligibility criteria may be expanded to include those companies which make annual remittances of Rs 50 crore or more as TDS, it says.