New Delhi, Feb 28 (UNI) The levy of fringe benefit tax (FBT) on Employee Stock Option Plan (ESOP) will impact the Information Technology industry in the country as it has been used as a retention tool, leading company Infosys said today.

''The Industry was surprised on introduction of Minimum Alternate Tax (MAT) which would eat into the margins,'' company's Chief Financial Officer V Balakrishnan said.

He, however, welcomed the higher allocation to education and infrastructure and measures taken to give a fillip to agricultural production that may help cut price rise.

TCS Chief Financial Officer S Mahalingam said the introduction of MAT has re-booted the benefits that this sector was to enjoy until 2009.

''The IT industry does pay tax in other geographies currently, but it remains to be seen whether the MAT burden can be off-set to some extent,'' he added.

Though the Finance Minister has made no commitments, the only silver lining for the IT industry is that by making the MAT connected to companies enjoying tax breaks under Section 10A and 10B, the government seems to be hinting at that tax incentives under the STPI scheme will be extended beyond 2009, Mr Balakrishnan said.

Another company, Wipro has said the impact of MAT on Indian software exporters will be limited.

UNI