Indian IT Training Institutes Fearful Of Service Tax

by Lorys Charalambous, Tax-News.com, Cyprus

04 March 2003

The recently unveiled 2003-04 budget is likely to cause problems for software training institutes in India, reports in the national media have suggested.

According to experts, software training institutes are likely to be deemed to fall under the category of vocational training - which has just become subject to service tax under the new budget. Speaking to the Financial Express on Monday, Kalpathi S. Suresh, chairman and chief executive of the country's third largest IT training provider, SSI Ltd explained that:

'From the first reading it would appear that IT education and training would be brought under the purview of an eight percent service tax. This would be highly detrimental to the interests of the industry, the hundreds of thousands of students enrolling for an IT training course and by extension to the IT services industry.'

Despite a substantial increase in the number of Western firms outsourcing back office and IT responsibilities to cost-effective locations such as India over the past few years, the country's IT education industry experienced a decline in revenues of around 40% between 2001 and 2002, according to the Financial Express report.

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