Nasscom urges govt to remove procedural bottlenecks
The National Association of Software and Services Companies is not demanding any major fresh concessions but only urging the government to remove certain procedural bottlenecks in order to further growth in the Indian software and services industry.
Recommendations presented by Nasscom are as follows:
The self declaration of Softex forms: Nasscom has recommended that the Software Export Declaration form as well as Forms A and B should be dispensed with or be made into Self Declaration Forms to avoid unnecessary paper work and delays in processing.
Clarification on onsite software development in Section 80HHE: Two of the most important demands of Nasscom are related to Section 10A/10B of the Income Tax Act. This section provides for Income Tax holiday to units registered with 100 per cent Export Oriented Units , Export Processing Zones and Software Technology Parks. Nasscom has recommended that a clarification be issued that onsite services will continue to get income tax exemption with retrospective effect under the new Sections 10A/10B of the Income Tax Act. Nasscom has also recommended that the Central Board of Direct Taxes should issue clear guidelines on the method of computation of deduction under Section 80HHE and clarify the term technical services to exclude:
- Expenses incurred in developing software onsite
- Expenses in foreign currency on marketing offices outside India
- Expenses incurred on foreign exchange on travel
Section 10A/10B of Income Tax Act is acting as a deterrent to Mergers and Acquisitions:
Another issue in Section 10A/10B is regarding change in ownership and the tax treatment. As per the provision of new Section 10A/10B, if during the year, more than 51 per cent of shareholding ownership changes in 100 per cent EOU, STP, EPZ then the company will cease to get Income Tax exemption from that year. Nasscom asserts that in listed companies, there is hardly any legal bar to change in shareholding pattern and the company should not lose its tax holiday status just because the ownership changes. Nasscom says the provision also hits start-ups, especially where the shareholding pattern may change with the exit of venture capitalists.
Dividends from Overseas Subsidiary Companies of IT Software and Service Companies should be tax-exempt: Another recommendation by Nasscom that affects Indian companies is setting up overseas subsidiaries. As per the Income Tax Act, if an overseas branch office brings in profits from its overseas software activities into India, then it gets income tax exemption, whereas an overseas subsidiary for similar operations does not get similar exemption. Nasscom urges the government to correct this.
Software Services should continue to remain outside the purview of sales tax: Nasscom has recommended that computer software development and IT software services should be continued to kept outside the purview of service tax in the domestic market. Various state governments have already reduced sales tax on software with the government of Karnataka rolling back the sales tax on software to zero percent.
No tax on E-commerce Transactions: Nasscom has demanded a tax moratorium of not having any fresh tax on e-commerce at least for the next five years.
Physical Bonding by Customs at IT Software Units at STP, 100% EOU, EPZ should be removed:
As per the current Exim Policy and Customs notifications, all units in EOU/EPZ/ STP are physically bonded i.e. equipment in these units cannot be taken out without prior permission of competent authority. Nasscom says that the problem with physical bonding is that it involves procedural delays. For example, new units coming in Bhubaneshwar have to wait for periods as long as 1 to 2 months because of want of customs inspection before they can start operation of the unit. Even transporting a laptop computer out from a STP unit for a demonstration or presentation to a client in a local hotel involves unwanted hardships.
Enhancement of Telecom Infrastructure: Nasscom has recommended allocation of resources for enhancement of infrastructure like airports and power at the major software cities of India and has also requested for at least 2 Gbps of national Internet bandwidth.
Some other recommendations by Nasscom include implementation of the recommendations of national IT task force for bringing down the street price of software and to retain zero import duty regime on computer software.
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