Our Bureau
Thiruvananthapuram, Dec.7
The predominant presence of small and medium IT companies in the State will make Kerala the hardest hit if the Software Technology Parks of India (STPI) scheme is allowed to expire in March 2011.
The Group of Technology Companies (Gtech), a strategic grouping of IT companies in the State, is seeking the Prime Minister's urgent intervention in the matter, and save hundreds of small and medium businesses from folding up.
Not convinced
Speaking to newspersons here, Mr V. K. Mathews, President, and Mr Anoop Ambika, Secretary, Gtech, said the closure of the STPI scheme would cause an estimated 85 per cent of the 200-odd small and medium companies in the State to close down.
Since most of the erstwhile STPI beneficiaries have since turned big players and overgrown the flagship scheme, Gtech is finding it difficult to mobilise leading industrial bodies to engage the Union Government on their behalf.
While the Union Ministry of Commerce is convinced that there is indeed a case for extending the STPI scheme, the crucial Ministry of Finance has not taken a view perhaps because of the tax implications from the move.
Extension sought
The Gtech suggested that the scheme be extended for another seven years to the SMEs so that they continue to receive tax incentives.
Explaining why SME companies should be allowed to enjoy STPI benefits, Mr Ambika said as much as 50 per cent of the overheads in IT companies are accounted for by payroll expenses. In the traditional sector, this was around 10 per cent only.
For instance, while the steel industry pays 18.9 per cent of total revenue as taxes, IT industry pays 20.1 per cent as taxes even with the STPI incentives that they receive.
This happens because 50 per cent f the expenses of any IT services company is pay roll expenses and 20-30 per cent of the salaries goes back to the Government in the form of income taxes.
While the top 100 firms would be contributing about 80 per cent of total IT industry output in the country, some 4,500 SMEs, despite their 20 per cent contribution, account for almost 65 per cent of total employment.
The National Association for Software and Service Companies (Nasscom) has increasingly been talking about getting Tier 1 and Tier 2 cities under the STPI umbrella, Mr Mathews said. This should be the way to go in Kerala as well.
Asked if pulling the plug off the STPI facility could mean increased focus on Special Economic Zone-led model of development, Mr Mathews said that inconsistencies in policy thinking fail to inspire confidence in the benefits expected to flow from SEZs.
Withdrawal of the STPI scheme would also throw up the larger issue of leaving the built-up infrastructure to rust, Mr Ambika said.
Thiruvananthapuram, Dec.7
The predominant presence of small and medium IT companies in the State will make Kerala the hardest hit if the Software Technology Parks of India (STPI) scheme is allowed to expire in March 2011.
The Group of Technology Companies (Gtech), a strategic grouping of IT companies in the State, is seeking the Prime Minister's urgent intervention in the matter, and save hundreds of small and medium businesses from folding up.
Not convinced
Speaking to newspersons here, Mr V. K. Mathews, President, and Mr Anoop Ambika, Secretary, Gtech, said the closure of the STPI scheme would cause an estimated 85 per cent of the 200-odd small and medium companies in the State to close down.
Since most of the erstwhile STPI beneficiaries have since turned big players and overgrown the flagship scheme, Gtech is finding it difficult to mobilise leading industrial bodies to engage the Union Government on their behalf.
While the Union Ministry of Commerce is convinced that there is indeed a case for extending the STPI scheme, the crucial Ministry of Finance has not taken a view perhaps because of the tax implications from the move.
Extension sought
The Gtech suggested that the scheme be extended for another seven years to the SMEs so that they continue to receive tax incentives.
Explaining why SME companies should be allowed to enjoy STPI benefits, Mr Ambika said as much as 50 per cent of the overheads in IT companies are accounted for by payroll expenses. In the traditional sector, this was around 10 per cent only.
For instance, while the steel industry pays 18.9 per cent of total revenue as taxes, IT industry pays 20.1 per cent as taxes even with the STPI incentives that they receive.
This happens because 50 per cent f the expenses of any IT services company is pay roll expenses and 20-30 per cent of the salaries goes back to the Government in the form of income taxes.
While the top 100 firms would be contributing about 80 per cent of total IT industry output in the country, some 4,500 SMEs, despite their 20 per cent contribution, account for almost 65 per cent of total employment.
The National Association for Software and Service Companies (Nasscom) has increasingly been talking about getting Tier 1 and Tier 2 cities under the STPI umbrella, Mr Mathews said. This should be the way to go in Kerala as well.
Asked if pulling the plug off the STPI facility could mean increased focus on Special Economic Zone-led model of development, Mr Mathews said that inconsistencies in policy thinking fail to inspire confidence in the benefits expected to flow from SEZs.
Withdrawal of the STPI scheme would also throw up the larger issue of leaving the built-up infrastructure to rust, Mr Ambika said.
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