Bangalore, Feb 29: The non-extension of tax holiday under STPI scheme in the Budget proposals for 2008-09, presented by Finance Minister P Chidambaram today, will badly affect employment generation in the IT sector, Infosys Chief Financial Officer V Balakrishnan said.
In his reaction to the Union Budget, he told UNI that an extended tax holiday would have given some breathing space to the export-driven IT industry, which had been affected by the hardening of the Rupee, increasing costs and falling margins. ''This will have an impact on employment generation in IT industry. Smaller companies will be the worst hit as their margins will fall due to higher tax outgo. The bigger companies have managed the currency appreciation well during the last two years, but when the tax holiday ends in March 2009, it will impact the whole industry,'' he said.
Infosys is the second largest exporter of software services, with over four billion US Dollar turnover. Its revenue from exports is nearly 98 per cent. When the industry comes under full tax regime, its tax outgo is expected to increase from the present 15 per cent to 22 per cent. It is expected to impact Infosys' margins by nearly three per cent.
The industry had sought extension of tax holiday beyond March 2009.
Mr Balakrishnan said NASSCOM had predicted that impact on jobs due to non-extension of STPI scheme might result in loss of 400,000 jobs in three to four years. ''Smaller IT companies offering huge employment opportunities will not be able to take the burden and this may lead to fall in employment generation.'' However, he said overall the 'election year budget' was good for the people in general. Income tax threshold limit had been increased and small farmers would benefit from the huge loan waiver, he added.