BANGALORE: The Karnataka Government is reportedly considering a proposal for
a roll-back of the sales tax on domestic software products and services that had
been announced during the recent State budget. The move has provided a
widespread relief among the IT players in the state.
This comes close on the heels of a representation made by the State
Information Technology Department’s headhoncho and Minister of State for
Information Technology M M Nanaiah, to Chief Minister S M Krishna. The
representation was made shortly after his return from CeBIT, Europe's largest IT
expo, where he had gone along with the State's IT secretary, Vivek Kulkarni to
invite investments in the State.
Speaking to CIOL, Nanaiah said he was hopeful that the representation would
have a positive impact on the industry. I have clearly stated my displeasure
over the imposition of the tax would have an adverse impact on the industry,
which is on a clear growth path, he said. The tax returns expected from the
state’s Rs 250 crore-domestic software industry will be a mere Rs 12 crore,
which is insignificant sum to romp up the budget deficit, the Minister added.
The representation has also taken Internet cafes and kiosks into
consideration in its plea, as the returns from this section will be minimal
considering the size of the industry, he said. The representation goes in tune
with the State IT department’s earlier announcement of its policy on having a
three years tax holiday period for IT companies. According to the Minister, the
representation also called on the government to refrain imposing sales tax on
the industry during the same period.
The recommendation is presently with the Finance Department, which is working
on all possibilities including issues relating to returns and budget deficit.
However, the Chief Minister Krishna will take a final decision on the issue,
shortly. Until then, companies will have to pay a four per cent sales tax on
every invoice. Bangalore has been topping the list in terms of revenue
generation from software exports and hence special preference will be given in
the future as well, the Minister said.
It is worthy to note that the Chief Minister had recently revoked sales tax
on kerosene and books. These were part of the commodities that were initially
imposed with a four per cent sales tax during the budget. This should give a
breather to the industry, which has been silently voicing its disapproval ever
since the budget announcements were made.