Monday, February 11, 2002		Article

NASSCOM (National Association of Software and Service Companies), the apex industry association of IT Software and Service companies in India, has submitted its recommendations for the Union Budget 2002 to the Government, for consideration. Nasscom has urged the government to remove certain procedural bottlenecks in order to further growth in the Indian software and services industry.

The president of Nasscom said: "The Government has been supportive to the Indian software and service industry and hope that it will continue to retain the incentives provided to help strengthen India's position as a leading software superpower worldwide. In order to sustain growth and reach revenues of $ 87 billion by 2008, the industry is looking forward to the assistance and assurance from the government that there will be no fresh imposition of tax and that the incentives continue to be long term."

Two of the most important demands of Nasscom are related to Section 10A/10B of Income Tax Act. This Section provides for Income Tax holiday to units registered with 100 per cent EOU, EPZ, STP. Nasscom has recommended that a clarification be issued that onsite services will continue to get income tax exemption with retrospective effect under the new Sections 10A/10B of the Income Tax Act.

Another recommendation is that computer software development and IT software services should be kept outside the purview of service tax in the domestic market. Various state governments have already reduced sales tax on software with the government of Karnataka rolling back the sales tax on software to zero percent.

The association has also demanded a tax moratorium of not having any fresh tax on e-commerce at least for the next five years.

The association also charted out key imperatives for both the industry and Government to achieve sustainable growth in the Indian IT Enabled Services (ITES) sector. This was announced at the sidelines of Nasscom 2002 - the International Business Conference being held in Mumbai.

Meanwhile, a recent Nasscom study has revealed that the ITES sector has emerged as a leading employment generator. The research indicates that an additional 36,000 jobs have been created over the past one year by the ITES sector, which is expected to employ over 1,06,000 employees by March 2002. The largest employer within the ITES segment was the Back Office operations that accounted for 35,000 employees and Rs.2,800 crores of the total revenues generated by IT Enabled Services in India. The second largest employer within the ITES space was the Customer Interaction Services sector that doubled its employee strength to 33,000 employees over a one-year period.

The study also indicates that the Indian ITES industry will continue to maintain its high growth trajectory and that by 2008 this sector would have grown from its current levels of Rs 7,100 crore to 81,000 crore and captured over a 10 per cent share of the global ITES market.