IT/ITeS Union Budget Expectations: Dun And Bradstreet

Dun and Bradstreet India, has released their Union Budget expectations for the IT/ITeS sector. These are mentioned below:

• In order to ease the complexity in taxes and procedures, clear codification/transparency of transfer pricing regulation is expected. The government is expected to adopt an entrepreneurship mission under which the support and tax exemptions should be given to small companies to help ease business.

• Software body NASSCOM has urged the government to withdraw the Minimum Alternate Tax (MAT) on SEZ units so as to help create conducive environment for the growth of the Indian IT-BPO sector. In FY12, MAT was increased to 18.5 percent on SEZ developers which resulted in a sharp deceleration in investments in SEZs. To boost development of SEZ units, the government can change the MAT rate to one-third of the corporate tax rates i.e., to 10 percent.

• The government is likely to abolish inverted duty structure, under which finished goods are taxed at lower rates than raw material for certain items like computer components and chemicals related sector. This move is likely to help revive the subdued demand and promote manufacturing in the country.

• Ambiguity and lack of clarity with regards to treatment of software being goods or services has resulted in dual taxation (i.e. both Central and State taxes on supply of software) leading to additional burden on the industry. It is anticipated that all transactions pertaining to supply of software (whether customised or packaged software) should be treated as services irrespective of the media and mode of transfer with the assurance from the states that no VAT shall be applied on software.

• Basic Customs Duty (BCD) likely to be exempted on certain hardware accessories like adapters, battery, laptop carry bags and speakers. Presently, products like laptops and peripherals are exempted from BCD. In order to maintain uniformity in sales tax rates applicable to the same products across the country, Manufacturers’ Association of Information Technology (MAIT) expects the government to include Information Technology Agreement (ITA) products in the list of declared goods.