Industry officials, however, kept a brave face, saying that they expect the issue to be dealt by the government post-budget or in the next budget.

The STPI scheme that provides a 10-year Income Tax exemption in software technology parks expires, in March 2009. “We expected the Finance Minister to extend the STPI scheme and also rationalise the fees, taxes and duties applicable on the telecom sector, but this was not even touched upon by the minister in his budget,” said Sourabh Kaushal, Industry Manager, Frost & Sullivan, South Asia and Middle East.

Chief Financial Officer of Perot Systems, Srinivas, said corporate taxes remaining unchanged would not be a relief to the export industry especially the IT and ITeS segment that’s been hit by the rupee appreciation and tax holiday going away in 2009. Nasscom said it is disappointed with the absence of any discussion on the extension of the STPI scheme. “This is extremely critical for small enterprises and the BPO industry, as well as for expansion in Tier 2 and Tier 3 cities as they are unable to avail the benefits of the SEZ scheme,” it said.

“The STPI benefits are available till March 31, 2009 and we are hopeful that through continued dialogue we will be able to convince the government to consider our proposal,” Nasscom said in a statement.

Further, Nasscom said the imposition of service tax of 12 per cent on customised software and higher excise duty on packaged software could lead to increased cost of IT.

“This impacts, in particular, small and medium enterprises which have just started deploying IT,” it said.

“The STPI extension request was not addressed. We have one more budget to go. It could very well happen in post-budget announcements or in the next budget”, Chief Financial Officer of Bangalore-based Wipro, Suresh Senapaty, said.

“We would have liked much more moderation of FBT (Fringe Benefit Tax) on ESOP (Employee Stock Options). But that did not happen”, he said.