BPO industry calls for extension of STPI, decouple from IT/ITES

The country's BPO Industry urged the Finance Minister P Chidambaram for an extension of the Software Technology Parks of India (STPI) scheme and decoupling of the industry from the IT/ITES sector to another special BPO department or Ministry in the Government.

Speaking at a pre budget session organised by Business Process Industry Association of India (BPIAI), an affiliated association of Confederation of Indian Industry (CII) BPIAI President Samir Chopra said that the Business Process Industry in India has witnessed phenomenal growth in the last few years. Talking about the challenges he mentioned that the abrupt rise of the rupee against the dollar and pound have left many young BPO firms gasping for breath. Tax sops from the STPI will also disappear for these companies and this might make investors avoid India and instead invest in other offshore locations like China, Sri Lanka and Philippines. ''Most believe the government stands to lose more in terms of indirect taxes than it will gain from taking away the tax breaks,'' Mr Chopra said.

The Manufacturing and IT sector has enjoyed tax breaks for over 30 years where as the BPO industry being five years old has had very little time to benefit from this though the BPOs have the highest density of workforce thereby providing 30 billion dollars export opportunity to India. According to Mr Chopra steps must be initiated to decouple the IT/ ITES from the BPO sector. He further added that the BPO industry is not looking for any fancy amendments in Budget 2008. Its expectations are simple; the tax framework ought to be more equitable and growth focused and less complex and arbitrarily administered.

BPIAI in its pre-Budget memorandum suggested the extension of tax holidays for STPI units for 20 more years, withdrawal of MAT, introduction of advance pricing arrangements for transfer pricing, abolition of FBT on ESOPs and simplification of tax holiday provisions are some of the key expectations. Extending the STPI scheme will also help offset the losses incurred due to the movement of rupee, which has appreciated by 13 per cent since April 2007 and has drastically hit the bottom-line of the BPOs. The business process wants tax sops not only for its international business that generate foreign exchange but also for the fast growing domestic segment which is generating huge amount of employment opportunities in tier 3-tier 4 cities and in remote towns and villages which is something the IT industry is unable to do.

Amongst other recommendations, a need for the recognition of the Business Process Industry as a separate Industry from the IT industry and the setting up of a special BPO department or Ministry in the Government, a proper method of determination of export turnover, optional ESI scheme are proposed to be put forward before the Finance Minister for consideration.

It was mentioned that unless the Government takes a very proactive stand to the BPO segment of the economy as a whole, a lot of the cost advantages that are this country's USP might dissipate. The advantages that we get vis--vis tax breaks etc, will be passed on to the customer either in its entirety or in part thereof and unless we are cost competitive, the projects that really matter to this industry will move elsewhere.

-- (UNI) -- 17DC14.xml

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