Dear Customer,
As you are aware the tax holiday, under the STPI scheme, had a sunset clause of March 31, 2010, and in the current budget 2009-10 presented on July 6, 2009, the tax holiday has been extended for only one year.
This piece-meal extension of the STPI scheme is not helping IT/ITeS companies to lake long term decisions and the sunset clause is foreseen as depletion in the Profits After Tax (PAT) beyond the financial year 2010-2011 for IT/ITeS and BPO companies.
In view of the above, many companies are seeing a hit on their bottomlines and erosion in their net profits, hence are actively considering the IT SEZs to avail these tax incentives and cut costs to remain competitive.
IT/ITeS & BPO Companies are taking strategic decision to expand / consolidate operations in IT SEZs to avail the above benefits/incentives and cut costs to remain competitive in the current business environment.
Please find attached the white paper on STP Vs SEZ – A strategic approach for IT/ITes companies along with a comparison of STP Vs SEZ for your ready reference based on the information available from reliable sources.
“Special Economic Zone” is a specifically delineated duty free enclave and deemed to be a foreign territory for the purpose of trade operations, duties, and tariffs with a focus to enhance the exports of goods and services. The SEZ act, 2005 provides for fiscal benefits and simplified procedural regulations to the developer and the unit (IT/ITeS company)
Snapshot of all SEZ Benefits for IT & ITeS Companies (Unit)
- Lower Infrastructure cost.
- Service Tax exemption on input Services.
- Exemption from payment of Cess, Duties and other levies like R & D Cess.
- Customs, Excise duty, & CST exemptions.
- Incom Tax holiday for 15 years with-out sunset clause.
- Exemption from state levies like VAT / LST / Luxury Tax etc.,
- MAT Exemption.
- Procedural simplifications.
For any other clarifications we shall be pleased to and explain further, the above stated. However, we also recommend the advice of the professional tax consultant specific to the Unit.
Regards
M.L.Rao.
Chief coordinator
Equate realtors.
H.O:: Hyderabad :: B.O: Vigaz.
SEZ vs. STPI
The SEZ scheme announced by the Government is seen as an attractive alternative to avail a host of tax benefits, spread over 5 to 15 years. Further the SEZs, being large campus developments and integrated complexes with amenities, offer better work environment to IT/ITeS talent pool.
|
Particulars |
SEZ |
STPI |
|
TAX |
· Income-tax holiday on export earnings for a period of 15 years ‘without a sunset clause’
· Reinvestment conditions for the last 5 years
|
· Income-tax holiday till Financial Year 2009-10 on export earnings
· Now extended for 1 more year
- MAT at 15% is applicable.
|
|
FISICAL
INCENTIVES |
· Exemption from payment of
Service Tax on input services
- Exemption of CST on Interstate purchase of goods.
|
· Service tax rebate available
Only where unit exports taxable
services”
· Re-imbursement of CST on
Interstate purchase of goods. |
|
LOCATIONS |
· Unit to be located only in
Designated SEZ |
- Units can be located anywhere in India.
|
4. SEZs SCORE OVER STPIs IN THE FOLLOWING AREAS:
Many IT/ITeS & BPO Companies are seeing this as a hit on their bottomlines and erosion in their net profits; and are actively considering the IT SEZs to avail these tax incentives and cut costs to remain competitive and primarily due to the absence of a sunset clause for claiming Income – Tax and other Tax related benefits.
Income-tax holiday till Financial Year 2009-10 on export earnings Now extended for 1 more year
MAT at 15% is applicable.
- Exemption from payment of Service Tax on input services
- Exemption of CST on Interstate purchase of goods.
- Service tax rebate available
Only where unit exports “taxable
services”
- Re-imbursement of CST on
Interstate purchase of goods.
Unit to be located only in
Designated SEZ
Units can be located anywhere in
