Should we stop the tax breaks for IT industry?
IT industry in India has enjoyed its honeymoon. In fact it is going beyond its honeymoon of tax holidays. The export revenues of software firms are tax-exempt. If not renewed this will come to an end this fiscal.
“It is imperative that the government announces an extension of fiscal benefits under section 10 (A) and (B) to mitigate the impact of recession and protectionist measures being adopted globally…Â (Source)
I empathize with the industry, as I am one of them. But, if I put on a different hat and think about it, may be the IT industry is overstaying the tax holiday.
IT in India has evolved beyond any reasonable doubt that it can sustain without any holidays. There are too many companies, which are coming up without any help from the government, and ecosystem is all built. It might not be a silicon valley but it is not far behind. It might not be a matured industry yet but it is getting there.
So, are the tax breaks still justifiable? My answer is no. They are not justifiable whether it is recession or not. There is no doubt that government needs money. Now, if these tax breaks are removed then there will be more money with the government, which can be used for other, needy industries.
There is a lurking feeling that the tax breaks should be given to some other industry other than IT. But, I couldn’t find any other industry, which do not have some kind of incentive. I thought the clean tech industry is a good bet but apparently they have their own breaks and I quit.
Would it be a mistake if we pull out the tax breaks from IT?