Clarity needed on tax framework for IT industry: Nasscom

The government has created a comprehensive budget with sharp focus on sustaining economic activity and investment but more clarity is needed on areas like taxation framework for adopting remote working on a long-term basis, IT body Nasscom said on Monday.

The industry association noted that the IT/ITeS (Information Technology-enabled Services) industry has been a key driver of growth and jobs in 2020 and there is an opportunity to significantly accelerate it further.

"For the IT sector, one of the biggest needs ahead of us is the development of future business models, with hybrid working becoming a reality.

"We look forward for the government to provide clarity on providing a framework in direct taxes and indirect taxes for the industry to adopt WFH/remote working on a long-term basis," Nasscom said in a statement.

It added that WFH (Work-From-Home) needs to be enabled in SEZs (Special Economic Zones) on a long-term basis.

"Since this requires movement of duty-free goods like laptops etc outside the SEZs, the finance ministry should provide the requisite clarifications under Customs and GST," it said.

Nasscom lauded the government's sharp focus on sustaining the economic activity and investment in key sectors like healthcare, fin-tech, education, infrastructure, R&D development, startups and manufacturing.

"The Budget has introduced some ease of doing business measures from taxation to investment to boost the country's economic activities and ensure job creation," it noted.

Nasscom said the government has provided 15 per cent tax rate to attract new manufacturing activities.

"We have suggested this same 15 per cent tax rate be offered to IT-ITeS companies in SEZs subject to some employment and investment criteria.

"We believe this can boost economic development in tier-II cities, drive employment and grow our exports," it added.

The Internet and Mobile Association of India (IAMAI) has also welcomed the steps taken by the government to boost the digital industry and support the startup ecosystem in the country.

"The focus on digital payments, and overall infrastructure development is a step towards realising the five trillion-dollar economy and will open up new opportunities for demand generation in the country," IAMAI president Subho Ray said.

CP Gurnani, MD and CEO of Tech Mahindra, said the Budget is a step in the direction towards Atmanirbharta.

"The FM has provided for ample opportunity to boost and sustain the gig economy, digital payments and research and development taking place within the country.

"The focus on innovation and R&D as an important pillar is a critical step in increasing the export income of Indian IT sector," he said.

With increased allocation towards infrastructure, financial inclusion and healthcare, Budget 2021 promises to provide the much-needed economic velocity to India's growth cycle, Gurnani highlighted.

"The move to provide greater impetus to India's manufacturing sector with an outlay of almost Rs 2 trillion over the next five years is indeed a welcome move.

"We are hopeful, this will pave the way for enhanced adoption of digital engineering capabilities by domestic players, especially in the Industry 4.0 segment, to give them a global edge," L&T Technology Services CEO and MD Keshab Panda said.

Tata Technologies CEO and MD Warren Harris said specific initiatives through production-linked schemes, creation of infrastructure for R&D and enabling skill development in new-gen technologies such as artificial intelligence (AI) and Machine Learning (ML) will help drive investment in Engineering and Research.

MAIT, an apex body representing the ICT and electronics manufacturing sector, said the National Language Translation Mission will enable Bharat on the digital highway allowing the masses to take ride on the digitisation of the economy.

"The allocation of R&D funds for development of digital payments technology and tools, the setting up of National Digital Educational Architecture to bring about a digital-first mindset in the activities of Centre and State/ Union Territories are positive steps in this direction," MAIT president Nitin Kunkolieker said.

• Budget 2021