IT-SME Association seeks sops in Budget

NEW DELHI, INDIA: IT-SME Association, representing over 3200 companies small and medium enterprises in India, wants sops in the forthcoming Union Budget, for sustaining growth of the IT-SME sector.

“We would like our finance minister to consider giving sops in this year’s budget to help SMEs to help our country,” Sankaran P Raghunathan, president of the IT-SME Association told CyberMedia News.

To reduce the cost of operation, the association has sought nil service tax on office space rentals up to 20,000 sq. ft, nil fringe benefit tax. The demand also includes setting-up of IT parks with built-up space for SMEs at affordable rates.

In order to make employment in the IT-SME look more lucrative, the association has also asked the government to withdraw the income tax limit for employees whose salaries are up to Rs 5 lakh annually.

“To make us more competitive, we want the finance minister to consider waving off income tax on income from both export and domestic income for SMEs with revenues under Rs 100 crore. We also want the service tax to be removed for services rendered by SMEs with revenues of less than Rs 10 crore. The government should set aside some business in their contracts for the SMEs and also extend the STPI scheme for SMEs for another 10 years till 2019,” he said.

To help the IT-SMEs to have their own infrastructure, Raghunathan said that the government should consider removing the stamp duty on property purchase by SMEs for their office space up to 20,000 sq. ft of built up office space or up to 40,000 sq. ft of land.

“The government should provide low rate (less than 10 per cent), long term (30 years and more) loans for SMEs to buy their own office space, with the entire interest to be written off every year. They should also consider allowing SMEs to co-own SEZ and relax the minimum land requirements of SEZs for SMEs,” he said.

To help the IT-SMEs have easier access to capital, the association has proposed setting-up of an exclusive stock market for SMEs to be listed; makes it easier for SMEs to raise equity.

“This will also encourage venture capital funds to be set up for investment specifically in SMEs,” Raghunathan pointed out.

The Association wanted the government to help reduce regulatory hassles, by making STPI the only window for all regulatory matters under all legislations—from customs, service tax, VAT, shops and establishment, and other Acts.

"Clear the ambiguity in the implementation of legislation – is there withholding tax on software imports; is software development an exempt service under service tax or is included for VAT as “works contract”; is software a product for sales tax purposes, etc.,” Raghunathan added.

The IT SME Association represents the 3,200+ IT SMEs in India today, contributing to about one per cent of India’s GDP. Out of a total of about 5,500 IT exporting companies under the STPI, 60 per cent are SMEs.

SMEs export about $10 billion, about 25 per cent of the total. SMEs employ about 550,000 people, one-third of the total workforce of 16.2 lakh in the industry.

They are growing at an average 65 per cent whereas the larger players are growing at less than 30 per cent. A SME makes less than Rs 100 crore in revenue; the average annual revenue is about Rs 10 crore for a SME.

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