Budget 2013 in India: Build infrastructure or seek tax exemption?

Indian BPOs seeking tax exemption

Indian BPOs seeking tax exemption

Established in 1988, NASSCOM (The National Association of Software and Services Companies), whose objective is to build a growth led and sustainable business services sector in the country, is hopeful that the Indian government will expend its resources with leanings towards the IT segment initiatives. MAIT (Manufacturers Association for Information Technology) on the other hand, established in 1982 for purpose of scientific, educational and IT industry promotion is focused more on tax exemption in Budget 2013.

The Director of government relations at NASSCOM, Bisakha Bhattacharya, is of the opinion that the government does acknowledge the IT’s role but still needs to make provisions for cyber-security and entrepreneurship. He also stressed the need for IT intervention in educational sector as well as health care industry.

Mr. Anwar Shirpurwala, Executive Director of MAIT, contends that there has been little focus on encouraging electronic goods manufactured domestically while costly tax structures often dishearten those interested in setting up plants. Consequently the hardware sector seeks tax exemption of customs duty on imported hardware components as well as an extension of timeline for the payment of service tax by IT companies from the sixth day of the following month to the twentieth.

Zensar Technologies headquartered in Pune and founded in 1991  is a transformational partner to a number of global corporations/ BPOs, The CEO Mr. Ganesh Nataranjan anticipates that there will be a continuation of SEZ schemes to bring in investors as well as more clarity in transfer pricing norms.

Relevance of security, infrastructure and pricing norms

In recent times the security of some of the country’s key websites has been cause for concern when the Supreme Court, the Congress Party and even the Cyber Emergency Response Team sites were hacked in recent times. The nation’s competence to address such intrusions has been brought to light.

The annual revenue for India’s IT division (inclusive of hardware) which contributes to around 6-8% of our GDP is around a $100 billion.  Therefore, NASSCOM has pushed for the Indian governments accelerating the IT infrastructure in relation to the rollout of the goods and services tax.

Transfer pricing norms has been a cause for much debate over the years. It specifically is brought to light when a huge corporation such as the US section of an Indian IT firm, transfers labor to the Indian unit. Both the provision and analysis of the laws pertaining to such transactions have been the cause of much conflict when the government has held IT firms accountable for exploiting the system to move profits to their subsidiaries in countries with lower tax rates.

While the budget is yet to satisfy both segments of the IT sector, a developed healthy infrastructure and fair taxes that would encourage the domestic manufacture of goods and services is looked forward to in the upcoming budget 2013.

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