K. Sheker, Director & Co-founder, Bay Talkitec

The Indian software industry has grown enormously over the last decade and contributes a healthy 7% (2008) to India’s GDP. Most of this growth has been possible due to the sudden surge in young, educated skilled IT professionals entering the sector thus providing the low-cost advantage to Indian software exports. The Indian government, at the same time, has been instrumental in encouraging this growth through introducing tax holidays and breaks. However, as the industry has developed and increasingly contributed to India’s growth, the software industry has been simultaneously brought under both service and sales tax regime. This double taxation policy followed under the aegis of both state and central government is proving to be a great hindrance to the industry’s sustenance. The union budget should clarify whether software is a product or a service, since software companies cannot continue to dole out the extra tax which would eventually erode their competitive advantage and ultimately make India less cost-effective as compared to other countries like China and Philippines, which are fast catching up on the software front. The union budget should strive to remove this anomaly and bring software industry under one tax regime.

K. Sheker, Director & Co-founder, Bay Talkitec