Karnataka dealers observe state-wide bandh today

Bangalore-based Association on Information Technology (AIT) has announced that IT dealers across the state would go on strike today to voice their strong protest against the state government's decision to hike the sales tax on computer hardware and software products from the prevailing 5% to 12%. 

Speaking to CyberMedia News, AIT president C Dhananjay says that the association is also planning a rally and hunger strike if needed. The association conducted a meeting yesterday to discuss strategies to counter the tax hike. It is also for the first time that the distributors like Tech Pac and Ingram are shutting their offices to express solidarity for the cause. The association is also likely to make a representation to the chief minister today. In addition to this, AIT is trying to muster suppport from other industry bodies like MAIT, Nasscom and
CII. 

Apart from the steep increase of sales tax on hardware and software, the state government has also proposing to raise the tax on computer consumables from 5% to 8%.

"This is a totally draconian move that shows lack of maturity on the part of the Government," remarks
Dhananjay.

He adds that as compared to neighboring states like Andhra Pradesh and Tamil Nadu, which levy 4% tax, Karnataka is paying a very high tax. The tax hike is expected to take effect from August 1, 2004.

AIT secretary R Sridhar, who runs Triangle Technologies, berated the government move saying that it would prompt software companies and investors to choose Chennai or Hyderabad over Bangalore to set up operations. "Infrastructure in the other cities is as good as Bangalore. Besides, since they need to pay a tax of just 4% on computer hardware, they would naturally prefer to go there," says he.

He opined that the present government is trying to make a political point to the masses. "We are not against the state taking a pro-rural approach. However, we hoped that the government would leave the IT sector untouched," he adds.

Justifying the hike, Karnataka finance minister S Siddaramaiah reportedly says, "Since all software and hardware firms in the IT sector are profitable, I expect them to contribute some amount to the government."

Reacting to the minister's statement, Sridhar says that the government suffered from the misconception that the IT industry is rich. "While software exporters are making good money, the state government doesn't understand the plight of IT dealers who are as it is pressured by low margins.”

PRIYA SREENIVAS

CYBERMEDIA NEWS