As Finance Minister Arun Jaitley prepares to present his maiden Budget in July, the IT sector is rooting for sops being given to tech firms in metro cities to be extended to tier 2 and 3 cities, as it will generate more employment and boost growth.
IT industry body Nasscom has laid out, the over $100 billion sector's expectations from this year's Budget.
1) "In order to generate employment in tier-2 and tier-3 cities, Nasscom recommends incentivisation for expansion into such towns and cities aiming at spreading employment opportunity, ensuring balanced growth, drive urbanisation across the country and encourage overall competitiveness of the industry," it said.
2) Nasscom has also recommended launching of an India Technology Entrepreneurship Mission (ITEM) to provide a supportive framework to technology start-ups and SMEs. Under this mission, difficulties related to taxation, regulations and funding environment are to be identified, it said. "We've seen instances at the operational level, existing regulations being interpreted in certain extreme form and all of this has led to mounting litigation in the sector, in areas like for example in transfer pricing with regard to the advance ruling and so on," Nasscom president R Chandrashekhar told NDTV.
3) The proposed mission will provide simple regulatory requirements, give incentives for intellectual property creation and generate employment, which would make policy interventions to mitigate cumulative tax liability from TDS, service tax, VAT and prevent depleting cash due to needless temporary cash outflows towards taxes, Nasscom said.
4) Nasscom has also urged the government to streamline procurement process for technology products and services including SME (small and medium enterprises) participation, settle long-pending dues on projects executed for central and state government and provide incentives for adoption of IT across sectors.
5) The government must clarify about royalty implications on software, eliminate MAT (minimum alternate tax) on SEZ (special economic zone) and take steps to minimise litigations, Nasscom said. "For example the SEZ schemes, the changes which came about and have diluted the original intent of the scheme. MAT for example is something which is not completely in accordance with what the spirit of the SEZ was," Mr Chandrashekar said.
6) Nasscom has urged the government to renegotiate tax treaties, ensure cross-border transfer pricing adjustments and introduce consolidated income tax filing for Indian MNCs (multi-national companies) since it will ease compliance for industry and the government.
7) The industry body has appealed for support to technology start-ups and SMEs. "There are problems in funding, these are not asset based companies. They are not necessarily very capital intensive, but they don't actually have bankable assets," Mr Chandrashekhar said.
(With agency inputs)