Clarify on tax sops

Updated: Jan 24 2005, 05:30am hrs
fe-ICRA SNAPSHOT
Size of the Indian software and services industry at $15.9 billion in FY2004. CAGR of more than 50% during FY1998-2003

Software export revenues at $12.5 bn (80% of total revenue of the industry and 20% of total exports from India)

Exports of IT services, products and technology services revenues at $8.9 billion while ITES revenues at $3.6 billion

Revenue worth $20 billion is expected by FY2005, with revenues from software and services exports to scale over $16 billion

Software exports from India have a marginal share of around 3% in global IT services spend

The industry is highly polarised. Large companies (with global operations) and small companies (operating in niche segments) co-exist

Software services are contributing to an increasing share of the country's GDP up from 0.3% in FY1995 to more than 3% in FY2004

CEO SPEAK
We expect the finance minister to clarify on the interpretation of Section 10A and 10B and on double taxation treaties. We need to invest in infrastructure. Inadequate infrastructure is beginning to hurt growth
Mohandas Pai,
CFO, Infosys Technologies
Currently, there are three billion-dollar Indian companies

The industry is expanding its radar to new service lines such as package software implementation, systems integration, R&D engineering and network management

USA continues to be the primary market. Indian companies export to around 112 countries around the world

KEY ISSUES
Any dilution of the income tax exemption may impact profitability of software companies

The revenue mix of the software majors continues to remain skewed in favour of onsite business. This will have a bearing on the margins

As revenue for software players is denominated in US dollars, any rupee appreciation has a negative impact on the players

India is a part of the Information Technology Agreement (ITA), according to which customs tariffs on IT items are to be brought down in stages to zero by 2005

Margins, even though comfortable, may be impacted by the ability to offshore, possible acquisitions, greater sales costs and higher wages

Availability of adequate visasa ructure

fe Perspective
CII suggestions
FICCi Wishlist
Take initiatives to provide required education and training to GenNext to ensure India maintains its leadership in IT outsourcing. Hike depreciation on computer hardware from 60% to 100%
Eliminate customs duty on computers and peripherals.
Extend tax exemptions for e-commerce
Amend section 10A so that tax holiday is available to software developers