STPI + SEZ = Green IT Sub Zone ?

Gopi

Any one who has experienced the early STPI process for starting a new unit and the current SEZ processes for starting a new developer/unit will recognize the order of magnitude complexity increase including an enhanced C-footprint.  While there may be a good reason for this, it appears that none of the increased complexity is really relevant for Software / IT companies. In fact this was the original reason for STPI scheme to be setup as the process for setting up an EOU for software companies is really so different as there is no physical export involved.

While an SEZ for a physical product is likely to benefit by creating a whole eco-system, this is almost completely unlikely for a software/it zone as most units would probably be operating with clients outside the zone (and country) and any sub-contracting will be in terms of services of people (staffing) and not manufactured components.

It is clear logically speaking that bundling Software/IT (in general services) units and developers with manufacturing units in terms of procedures is going to be certainly a big drag for the competitiveness of services industry.

I think it is straight forward to customize the SEZ Scheme for Software/IT/Services companies by taking the best ideas of STPI scheme and incorporating the same into the SEZ scheme for services companies, thereby creating the concept of an IT Sub Zone.

An IT Sub Zone can be a minimalist SEZ granted to a legal/logical entity - company/unit or a small area (say 2 acres at the most). The procedure for creating an ITSubZone should at least be as simple as an SEZ Unit (or simpler) with the authority lying with a DC or Director.  Developers/Units/CoDevelopers of existing IT SEZs must be granted a one time option to switch to one or more IT SubZone(s). An ITSubZone may be for a company/unit or place. In the later case simplified versions of existing SEZ Unit procedures may be applied for allowing Units to operate in the SubZone.

I think NASSCOM must take up a discussion on creating a white paper on IT SubZone(s) urgently and submit to GoI before March 2010. This will certainly make it possible for SMEs to invest in IT SubZone(s). It will even benefit larger companies by applying for a SubZone for more than one facility across the country.  Surplus IT SEZs will be able to cater to the needs of SMEs by converting to one or more SubZones.

It is imperative that India evolves an appropriate policy for software/IT/services exports which will ensure that the IT industry will continue to survive and thrive. As a leader in services exports, it is up to India to create a policy that others will follow ...

(note, subzone as a concept is already present in countries like USA although with a different set of goals - primarily for manufacturing segment)

Replies to this Topic

Umesh

With the sunset clause on the STPI scheme, it is difficult for SMEs to move to an SEZ under the present structure.

Your call to NASSCOM to create a white paper for IT and ITES SEZ for SMEs(i prefer to call it this way rather than IT subzone as too many new descriptions create confusion in the minds of our government babus) is welcome and a urgent requirement considering the time constraints.

Gopi

I think the need of the hour is to have a vision of what the world will be in the next 3-10 years and creating a policy framework that creates an environment that provides a competitive advantage for companies operating from India. The policy should in fact be leading and defining the future of IT globally.

Some sample goals I can think of:

+ Locate 80% of Clouds Wordwide in India

+ Treat all software product license, subscription sales as exports (within or outside India)

+ Introduce negative tax on semiconductor chips manufactured in India

SEZs must compete with the rest of the country for attracting operating units through their superior infrastructure rather than through a monopoly on tax breaks which should be made available to organizations anywhere based on strategic long term national economic objectives.

sugeetha

I fully agree with your view points. But I am not too sure about the sales Tax on Indigenous sales and special treatment for semi conductor chips.But as rightly pointed out by you Nasscom should take it up with Govt and bring out a new SEZ policy exclusively applicable to software industry.

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