15 years back, the Indian government, granted tax concessions (between 5-8%) to enterprises operating under Software & Technology Parks of India (STPI) to give a boost to this (then sunrise) industry. It was considered wise to give this booster shot to help such companies earn more and enjoy a tax concession.
It is now time to decide on either extending or allowing this concession to cease as per the provisions in force. The industry ( which now extends below software companies and includes many ITeS -- IT enabled Services) is rallying to get this extended for another 3-5 years. It will surely help them with a direct impact on their bottomline. If that does not happen, it is likely to adversely impact their earnings by that margin.
While there are no clear clues, it is being widely hoped that the government will extend this concession but negotiate with the industry on the duration. These times of recession are surely not the best to have some more tax outflow but the government has to also look at how this impact tax collections -- which would be a big amount once these tax are brought in force.
For now, the industry groups are waiting for the new government formed to review and come up with a recommendation, but this is surely going to impact most companies operating from India. It is still not clear, if this will impact the pricing levels for future contracts, but surely, it does not help the service providers much and they will then need to take a call if they fork out this extra money from their coffers or try to increase their billing rates marginally -- or most likely as it will be : a little bit of both
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