Budget impact on IT/ITES sector: PwC view

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The Indian IT / ITES industry size pegged at USD 60 billion. Despite the global economic slowdown, the sector continues its growth trajectory at a CAGR of 14% and constitutes a 5.8% share in GDP. It is the highest employment generator in the Indian service industry.

US President Obama "say no to Bangalore and yes to Buffalo" comment had created a lot of apprehensions in IT/ITES sector. The outright service tax exemption was restored for SEZ units with respect to input services and was wholly consumed within SEZ; however refund  mechanism was to be followed with respect to other services. The government has clarified that services rendered by BPOs in India will qualify as exports if benefits accrue to the service recipient outside India.

Snapshot of benefits to the Industry from Budget '09

Income Tax - Industry Specific Proposals

- Tax holiday for exports by STPI / EOU units to be extended by one year, i.e. upto March 2011

- Effective rate of MAT increased from 11.33% to 17%; carry forward of MAT credit enhanced from 7 to 10 years

- Removal of anomaly in the formula for computing deduction under Section 10AA; deduction to be computed with reference to total turnover of the undertaking; amendment to take effect from AY 2010-11.

 

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