Expert Speak
Tax Reforms or Tax Disparities: From IT Perspective

“Observe around you and be thankful for all that you have (had) in transitory lifetime.” This is what seems to have been conveyed to Indian IT sector particularly small IT companies. Already down due to rising rupee, IT sector is soon going to loose income tax benefit offered to it under STPI scheme though tax benefit will continue for big IT players (as difficult for small companies to afford) under SEZ scheme.

Tax benefits to IT companies u/s 10A and 100% EOUs u/s10B won’t continue after 31st March 2009 however, tax benefits to similar companies will exist if these companies open new units in SEZ.STPI and 100% EOUs can be opened anywhere in India and hence beneficial for small players but SEZ units can be opened in permitted SEZ areas only thereby suits big companies. Where as opening of new units in SEZ won’t be a problem for big companies but for small companies period after 31st March 2009 will be a period challenging their existence. These small companies will not only pay taxes to Government but will face tough competition from tax exempted, big national and multinational, companies operating from government approved SEZs. Are we moving away from the moral rationale behind making the rich pay more taxes than the poor? Can’t we have a level of taxation that does not stifle commerce?

We need to sit and ponder why taxes are levied and what should be the government role in framing suitable and acceptable tax measures.Why should a farmer with an income of Rs.50 lacs not pay any tax? Why should an industrialist not pay any tax when he converts agriculture land into SEZ?
No doubt, many tax reforms are required in our country; however, measures for tax reforms should not become reason for tax disparities.

Puneet Puri, Partner

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