Finance minister Pranab Mukherjee's budget proposals for the 2011-12 fiscal have left the information technology (IT) sector disappointed.
The central government has proposed to widen the tax net by refusing to extend the tax holiday the industry has been enjoying under the software technology park of India (STPI) scheme, and levying minimum alternate tax (MAT) on units in special economic zones (SEZ).
These two proposals would increase the tax burden on the IT services sector.
In last year's budget, the government had extended the tax holiday under STPI scheme that expired in 2010 by one year. IT services companies also enjoyed tax exemptions on income earned from SEZ-based units. These two tax sops have now been withdrawn.
''The services sector was lauded for its double-digit growth rates, but the fastest growing services industry, IT-BPO faced double negatives: imposition of MAT on SEZ, and the withdrawal of tax exemption under Section 10A/10B (of the STPI),'' said industry body National Association of Software Services Companies (Nasscom).
The association regretted that the tax incentive under the SEZ scheme was withdrawn earlier than promised.