After the declaration of the national budget for 2008-09, small and medium IT enterprises get disappointed, as there is not much scope to enhance growth prospects of the IT industry.

The National Association of Software and Services Companies (Nasscom) showed extreme distress as Finance Minister P. Chidambaram did not remark on extending the Software Technology Parks of India (STPI) scheme.

The STPI scheme that offers up tax exemptions for the IT industry expires on March 31, 2009.

Nasscom stated, “This (STPI scheme) 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 (special economic zone) scheme.”

Business Process Industry Association of India (BPIAI) president Sam Chopra said, “Extension of tax holidays for STPI units for 20 more years would have helped the fast growing domestic business process industry segment.”

"From IT and telecom industry point of view, apart from few small indirect positives, it was a lacklustre budget,” told Sourabh Kaushal, industry manager (South Asia and Middle East), Frost & Sullivan, a global consulting firm.

“We expected the finance minister to extend the STPI scheme and also to rationalise the fees, taxes and duties applicable on the telecom sector, but this was not even touched upon by the minister in his budget," Mr. Kaushal also said.

Ravi Viswanathan, Vice-President, Tata Consultancy Services, said that the service tax of 12% on customised software plus higher excise duty on packaged software can result in augmented IT cost and can decelerate IT usage in the domestic segment.

Kapil Dev Singh, country manager of IT intelligence and advisory firm IDC India said, “The contribution of the IT industry to the buoyant Indian economy did not deserve excise enhancement on packaged software and imposition of service tax on custom software.”

"The budget is not delightful for the Indian BPO industries. While we say that the Indian domestic BPO segment will contribute $30 billion export opportunity by 2010 at a growth of 52 percent, we now need to re-look and reconsider it," said Chopra of BPIAI.

Cisco president and country manger (India and SAARC) Naresh Wadhwa said, “On the taxation front, the reduced tax burden will be a relief to individual tax players. It would have been a boon for the Indian industry had the same been applied to corporate taxes.”

"I believe that there was a need to address some of the issues, especially in the context of the rupee appreciation," said Ravi Pandit, chairman and group CEO of KPIT Cummins.

Kris Gopalakrishnan, CEO and Managing Director, Infosys Technologies, stated that the budget has not been encouraging for the IT industry. Smaller companies should have been given tax relief to oppose the impact of rising rupee value.