MUMBAI: The IT sector, which witnessed exponential growth for well over a decade, appears to have been hit by the economic slowdown as well. According to official records from the Board of Approval set up by the Centre to study
SEZ proposals, two leading firms, Base Realty and Raheja Universal, have dropped their proposals to set up IT special economic zones in Pune and Thane respectively. Significantly, several firms in AP, Gujarat and Karnataka too have taken identical decisions.
Base Realty had proposed to set up an IT SEZ at Hinjewadi in Pune district on 10.56 hectares of land, with an investment of Rs 296 crore and a job potential for 9,000 persons. The proposal was approved on May 15, 2008. Raheja Universal was to set up in Thane district on 20 hectares of land, with a total investment of Rs 870 crore and jobs for 1.5 lakh. Its project was approved on June 13, 2007.
In their subsequent applications to BoA to drop the proposals, both Base Realty and Raheja have submitted the same reasons: the economic slowdown and the poor demand for space for the IT sector. The more significant reason for the drastic step is the new direct tax code, which will come into force from April 1, 2012.
"We proposed to drop our plan to set up an IT SEZ, as there is uncertainty over continuity of fiscal concessions under the direct tax code regime and uncertainty over availability of tax holidays," the duo submitted.
Reportedly, the promoters of IT SEZs were stunned about the new direct tax code regime. "When the concept of IT SEZs emerged, it was promised that there would be a tax holiday for well over a decade. However, now the Centre has introduced minimum alternate tax. Under the circumstances, setting up an IT SEZ is a bad idea," a senior official said.
The global economic slowdown has also had an adverse impact on the IT sector. "Most IT firms in India were dependent on USA, UK and Europe for IT jobs. Now that they have stopped outsourcing, they are at a loose end," the official said, adding that reportedly over 50,000 IT graduates who had been recruited by IT firms in anticipation were being given marching orders. "Further, as a result of the recession, the influx of the IT population from Punjab, Andhra Pradesh and Karnataka to Maharashtra has come to a grinding halt," he added.
The official claimed that the UPA government was in the process of reconsidering the direct tax code regime, so that IT SEZs would get some relief. "Our information is that the existing tax holiday will continue for those units which go into production before April 1, 2014, but so far there are no written instructions" he said.
Source : timesofindia.indiatimes.com