Govt justifies tax relief for IT sector, rejects BJP demand

The BJP on Monday urged the State government to stop giving tax relief to profit-making information technology companies. But the government rejected the demand, saying the IT sector creates lakhs of jobs and hence deserves tax relief. 

The BJP’s MLC, G Madhusudhan, said the tax relief given to IT companies exceeded the budget. “The total outlay, as shown in the budget, is Rs 1.38 lakh crore. The tax relief to IT companies for 2013-14 was Rs 1.42 lakh crore. As of February 17, the total tax break for the IT companies is a whopping Rs 1.65 lakh crore.” 

Other BJP MLCs also slammed the government and suggested that the relief for IT companies was more from Central taxes, not the State’s. 

But S R Patil, Minister for IT, Biotechnology and Science and Technology, justified the tax rebate, saying the IT sector provided direct employment to 10 lakh people and indirect employment to 20 lakh people in the State. “By 2020, we expect the IT companies to provide direct employment to 20 lakh people and indirect employment to 60 lakh people,” he said. “Today, if Bangalore is on the world map, it is because of the IT industry. Hence, we have been giving them tax relief.” 

As per the new IT policy, the government is encouraging the IT companies to move out of Bangalore and set up shop in other cities where land is available at cheaper rates. At present, most IT firms are located in zones 1, 2, and 3, viz, Bangalore, Mysore and Mangalore. The government is now trying to encourage the firms to set up shop in zone 4, he added. 

Besides, IT firms will receive relief of up to 75 per cent from stamp duty and registration fee if they set up shop in Mysore, Mangalore and other tier II cities.

 The minister further said that IT firms would continue to receive exemptions in electricity usage as industrial rates would be applied to them instead of commercial rates. Start-ups in tier II and tier III cities would be refunded Rs 2, 000 and above from the provident fund and employee insurance scheme, he added.