Bangalore: Over 3,000 dealers of IT products and services in Karnataka observed a bandh today (Jul 21, 2004) demanding a roll back of the steep increase in sales tax rates on computers, software and IT services announced in the State Budget.

The dealers, under the Forum of Association for Information Technology has termed "retrograde and directionless" the Budget proposal to increase the taxes to 13.8 per cent from the existing 5.75 per cent.

"The current Budget is set to reverse the trend and block the growth of IT in Karnataka," AIT secretary R Sridhar said in a statement in Bangalore.

The ruling Congress-JD-S (Janata Dal-Secular) coalition presented its first budget early this week with a "pro-poor and pro-farmer" focus and taxing the "well off".

"When the entire country is getting to move into the VAT (Value Added Tax) regime and tax rates for IT products in the neighbouring States at four per cent, this move by the Government is retrograde and directionless," he said.

The Association is submitting a memorandum to Chief Minister Dharam Singh and Siddaramaiah, who holds the finance portfolio to roll back the tax hikes, and threatened to hold a protest march and go on a indefinite strike if their demands are not met.

"The Government appears to be very myopic in its vision and is using the budget as a political tool instead of a fiscal exercise," it said.