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Krishna withdraws sales tax on software

Fakir Chand in Bangalore

The slowdown in the US economy is turning out to be a blessing in disguise to the beleaguered software companies in Karnataka as Chief Minister S M Krishna has agreed to withdraw the 4 per cent sales tax he has proposed in the budget for the current fiscal year on computer software sales.

Bowing to the pressures mounted on him by the IT industry in the state ever since he made the proposal during his budget presentation last month, Krishna announced on Sunday to withdraw the proposed tax at the Bangalore Bio.Com 2001, being held for the first time in the country, to showcase the challenges and opportunities in the field of biotechnology.

"I think this tax will hurt a number of small software companies, more at a time when the growth in the IT industry is likely to be hit due to the meltdown in the US economy. As these companies require some support from the state government, I will amend the proposals to withdraw the tax on it," Krishna declared, adding that even the proposed professional tax on persons operating mobile services, Internet services, information kiosks, and e-commerce business would also stand withdrawn with effect from the first of this month.

Earlier, inaugurating the three-day international conference-cum exposition at the imposing Bangalore Palace grounds, Krishna said though the scope of biotechnology was limitless, India had only scratched its surface so far.

"The promise of biotechnology is immense and concerns virtually every sector of our society and human activity, including agriculture and medicine."

Stating that the BT industry in India was around $2.5 billion in revenue generation annually, the chief minister said about 60 per cent of its growth came from its healthcare segment, whereas only 10 per cent growth was seen from the agriculture sector, with the rest from bioinformatics and genomics.

In the agriculture sector, BT is primarily expected to benefit farmers. While farmers in the US spend around $5.75 billion on pesticides and insecticides annually, the Indian farming community spends a mere Rs 30 billion on the bio chemicals, out of which 50 per cent goes for protecting cotton from pests/insects.

"If biotechnology transgenic varieties resistant to pests are developed, our farmers need not spend their resources, including loans they take from banks or cooperatives on pesticides and insecticides. BT can save Rs 15 billion on these bio chemicals in the case of cotton alone," Krishna affirmed.

In order to help farmers of north Karnataka where cotton is grown extensively, the state government is setting up an Institute of Agriculture Biotech in the University of Agricultural Sciences at Dharwad with a corpus of Rs 50 million.

Exhorting global bioinforamti companies to set up base in Bangalore for growing quickly, Krishna reminded the 600-odd delegates participating in the three-day symposium that

Karnataka and Bangalore were the best bet for investors and entrepreneurs to make use of the resources, skills, and infrastructure available in abundance.

In this case, the chief minister cited the presence of the world renowned Indian Institute of Science, National Center for Biological Sciences, J N Center for Advanced Scientific Research, all located in the heart of Bangalore.

"Presently, many of our Bangalore-based biotech companies are undertaking only contract research for a number of prestigious American and European laboratories and pharmaceutical companies. With most of the research and development in BT being controlled by these foreign labs, our companies are made to do only a small module of their R&D. As the IT sector witnessed such an approach before the boom, I am confident that a similar history will repeat in the case of biotechnology too," Krishna claimed.

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