NASSCOM Welcomes Govt Steps For Indian IT Sector

The National Association of Software and Service Companies (NASSCOM) welcomes the various measures undertaken by the Government of India in the recent past to improve the overall business environment in India aimed at enhancing India’s image as a preferred business destination. The Finance Ministry, in the past several months, have made various policy announcements in existing policies and proposed other recommendations which will be favourable for the Indian IT sector.

Expressing his pleasure on governments’ recent initiatives, Som Mittal, President, NASSCOM, said, “Given the difficult global environment, it becomes very important for the industry to attract foreign investors. Encouraging exports is one way of doing so and therefore it becomes important for an export-centric Indian IT-BPM industry to attract more and more foreign investments into India. Such initiatives will help global and Indian multi-national companies expand operations, attract high-value investments and restore investment confidence.”

Last year, the Prime Minister’s Office had constituted the Rangachary Committee to determine the approach to taxation of the IT sector under the existing legislative framework. The Government rescinded and modified the circulars pertaining to taxation of R&D centres in India, which will play an instrumental role in developing software solutions. Further, the SEZ rules were also modified to meet some of the specific sectoral characteristic of the IT sector. The government has eliminated a minimum land requirement for setting up SEZ for IT/ITeS, but a minimum processing area requirement is applicable as per city category.

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The Finance Ministry had adopted a consultative approach and addressed several concerns before finalising the rules. This is the first time for the country, and it is indeed one of the most comprehensive Safe harbour provisions globally. Companies operating in India will have three options available to assess and file tax returns Advance Pricing Agreement, Safe Harbor Provision and regular Transfer Pricing route. These three options once available will address most income tax related issues of MNCs in India. The PMO also reviewed the policy on preferential market access based on which DEITy will present a new draft policy for Cabinet approval. It will incorporate a detailed provision for specific security standards, alternative modes of security certification and a roadmap for build-up of domestic testing capacity.

In addition to transfer pricing, the GAAR provisions based on the recommendations of Shome Committee are being amended. Several key recommendations accepted by the Ministry will be implemented under the GAAR regime.
The Finance Ministry, based on feedback from NASSCOM and industry leaders, has also recently set up a weekly Forum chaired by Dr. Shome, where industry and tax officers discuss procedures that could be made simpler. This committee will ensure that the Indian tax system ‘reflects best global practises’ and will submit periodic reports that can be implemented to strengthen the capacity of the Indian tax system on review of application of tax policies and tax laws.

The Indian IT-BPM industry will grow at a rate of 14 per cent this year. The PMO has gone a long way in attracting foreign investors and we hope with initiatives such as these, MNCs will set-up their business in the country and will continue to expand and grow.