January 26, 2021

BUDGET 2013: e’Scan urges more Govt action to support IT Sector

Budget 2012 pretty much ignored the IT Sector. But this year, the sector hopes for a better growth oriented budget, which will re-install business confidence, especially in the small and medium IT Companies.

Mr.Govind_Rammurthy_-_CEO_&_Managing_Director pic

E’Scanwish list for IT industry covers:

–              Governments’ quick move on all the areas recommended by The Rangachary Panel, especially those relating to Transfer Pricing and safe harbor provisions.

–              The sector’s expectation for the concessions for small and medium companies, simpler tax structure for angel investors and policies to help develop infrastructure in tier II and tier III cities, to help ease business.

–              Currently there are very few profit-based tax exemptions available, such as for Special Economic Zones, backward states, etc. Investment – linked incentives are restricted to a select group of industries only. To promote industrial and investment growth, it is suggested to expand the scope of profit based tax holidays or alternatively the investment linked incentives to a large category of industries, including IT sector.

–              The present Minimum Alternate Tax (“MAT) at 18.5 percent plus surcharge imposes considerable cash flow constraints on fast growing India IT-BPO. Hence it is advisable that the rate of MAT be reduced if not eliminated altogether.

–              The current rate of corporate tax of 30% while not excessive is higher compared to rates in several other countries. There is also a trend for the corporate tax rates to be reduced by several other countries to attract investment. In this backdrop, it may be appropriate to consider a corporate tax reduction or, otherwise, atleast an elimination of the surcharge and cess.

–              A definitive timeline and roadmap for implementation of GST and similarly, more clarity on implementation of the DTC will be helpful.

–              More clarity with regard to treatment of Software being goods or services, which will avoid the present dual taxation.

All in all we expect a healthy, responsible and growth supportive budget, which has the potential to turn out to be a game changer for the Indian economy that is currently witnessing a below potential growth along with high inflation.