Welcome rollback

This is a rollback few will complain about. The Tamil Nadu government's decision to withdraw the multipoint sales tax on IT products is sweet news to the industry and buyers of IT products. 

In the State Budget for 2002-03, presented in the Assembly in March-end, there was a proposal to levy a 1 percent sales tax at each point of sale of many product categories, including IT. The announcement caught the State's IT industry unawares. It was a decision that could have a major and adverse impact on the industry.

With this withdrawal, Chief Minister J Jayalalithaa has demonstrated her government's support to the IT segment. The government has heeded to the requests from the State's IT industry to reconsider the tax proposals and save the sector from its adverse impact. The Chief Minister deserves full support from the industry for taking this bold move. The announcement has also reaffirmed the ruling party's adherence to the norms of a democratic society which requires all actions to benefit the voting public.

If the multipoint tax had not been withdrawn, buyers and sellers of IT products would have had to bear additional transaction costs while choosing IT products. Such a tax would have increased the consumer prices at a time when the industry is struggling maintain a respectable growth rate in the sale of cutting edge IT products. Moreover, to satisfy the price-sensitive customers, IT resellers would have been forced to look for ways to avoid the tax.

The organized industry would have been hurt the most as they would not be able avoid the tax and customers would have fled
to the already dominant 'grey' market of locally-assembled products. And if that had happened, bulk of the projected revenue from the tax would not have reached the government. Now all this is past. The industry can look forward to similar sympathetic gestures which will give fillip to the sales. The industry should realize the important role played by the coming together of various segments under one banner. The collective determination of this group in highlighting the adverse impact of the taxation proposals to all the State's key decision-makers has certainly played a role in influencing the positive government action.

While this taxation cloud has cleared, other good things too are happening in the State. The State government has announced the project to launch the second Tidel Park to offer infrastructure facilities to IT companies. The park, which will come in the 40 acre site next to the existing Tidel Park, will be built by a Singapore based company. However, in view of the flux in the economic scene, the government has been cautious. The new Tidel Park will be built in phases based on the rising demand for space in the next two years.

These two happenings send out a positive signal about the future of the IT sector in the State.