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The BPO companies in India feel that the government has been treating it like a country cousin as compared to the software services sector.

BPO heads all over India feel that the extension of sops for companies located at Software Technology Parks of India (STPI) should extend beyond 2009.

Software Technology Parks and SEZs are zones that provide upto 100 per cent export oriented scheme wherein software development can be exported.

Currently, IT companies located at STPIs are granted a tax holiday till 2009 and will have to pay tax like a regular business establishment. Nasscom has been lobbying for the tax holiday on STPIs to be extended till 2019.

Further, the industry is asking the government to lower service tax inputs, telecom connectivity costs and asking for STPIs and SEZs to be treated at par.
The problem that BPO companies are facing is that most SEZs are outside city limits and hence BPO staffers would have to commute long distances.

“We are providing an alternative to public transport by employing private sector transport in a large scale and the government should look at providing some subsidy for these vehicle owners,” says PG Raghuraman, Lead executive, Accenture BPO, India.

There are concerns within the industry when it comes to the taxation issue.
Mukul Agrawal, MD, Unisys Global Services India says, "In the past there has been a lot of discussion and a few circulars have been issued and were withdrawn later. The entire industry would benefit if there was more clarity in the coming budget."

"The service tax paid by BPOs range from 28 – 60 per cent depending on the contract size," says an analyst from a Mumbai-based brokerage house. Smaller BPOs are concerned that if they were to move out of STPIs after 2009, their business would be affected.

The BPO industry also wants a more level playing field when it comes to service tax paid on exports. “A company located in a SEZ does not have to pay service tax on exports, while a company in STPI has to pay service tax,” says Raghuraman. The industry suggests that this service tax should be refunded at a future date.

Raghuraman says that cost is still a huge advantage and the government should look at nurturing this nascent industry and reducing costs will help them to be more competitive.

In the recent Nasscom summit chairman Ramalinga Raju said that if the tax holiday is not extended it result in lesser job creation as companies will be forced to look at other destinations.