Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
 
 
 
 
Popular Search: ACCOUNTING STANDARD :: VAT RATES :: ACCOUNTING STANDARDS :: list of goods taxed at 4% :: cpt :: TAX RATES - GOODS TAXABLE @ 4% :: form 3cd :: empanelment :: VAT Audit :: articles on VAT and GST in India :: due date for vat payment :: TDS :: Central Excise rule to resale the machines to a new company :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes
 
 
« Service Tax »
 A 5-Point Guide For Buyers To Understand The Effect Of GST On Real Estate
 Stalled unsorted diamond imports to resume after GST rate revision
 TDS, TCS deductors can apply for GST registration from 18 September
 E-commerce companies face tax heat as I-T department says discounts should be treated as capital spend
 Central Goods and Services Tax (Sixth Amendment) Rules, 2017
 GST will also impact direct tax collection
 Seeks to extend time period for filing of details in FORM GSTR-6 for months of July & August
 GST: Is input tax credit available for tax paid on mobiles given to staff?
 GST filing, reconciliation solution launched
  Finance Ministry asks taxmen to submit note on high-pitched assessments
 Step by Step Guide for GST Enrolment for existing Central Excise / Service Tax Assessees

IT-ITeS industry: Rising gap between policy and implementation
December, 22nd 2011

The information technology-information technology-enabled services (IT-ITeS) industry is worried. Not just by the unfolding financial crisis and economic slowdown in the West, but also by the rising gap between policy and its implementation, between intent and bureaucratic interpretation.

There is a perception in industry that revenue targets are chased and demands made even when eventual legal reversal is certain. Meanwhile, business growth is hobbled. New business models and new technology are sought to be understood through the prism of the old world. At some level, there seems to be lack of understanding of how the IT sector operates.

Issues about onsite services, transfer pricing, service-tax refunds, denial of legitimate tax benefits and exemption/refund to SEZ units have become major frustrations for the industry. If an Indian company or the Indian arm of an MNC is contracted to work for a foreign customer/partner, then it has to deliver part of the work onsite at customer premises overseas. In recent years, revenue authorities have begun to deny tax exemption to IT companies in respect of onsite services treating this as 'manpower services'. When it is a part of customer engagement, such services do not qualify as 'manpower services' just because they are charged by the effort. It is time that we stop disparaging India's success - which is far beyond labour arbitrage and involves deep skills, unique processes and value creation.

A large number of global companies undertake servicing, back-office work and product development through their own captive centres in India. Similarly, Indian companies, too, have subsidiary operations overseas and use transfer price mechanism for cross-border invoicing. Transfer pricing issues are well-known but international practices and standards have evolved to meet the needs of a rapidly-globalising and interconnected world.

These can be suitably customised and adapted to serve the national interests without discouraging and frustrating firms that choose to locate their activity in India. Possible instruments include 'safe harbour' provisions and advance pricing agreements. Unfortunately, as yet we do not make use of these mechanisms, nor has the Dispute Resolution Process been effective.

Indian tax rates are lower than those of major developed nations that receive services from India, so there is no incentive to understate income from Indian operations. The India advantage of value and process maturity is leading to sophisticated analytical work, product development being carried out by MNCs through their subsidiaries.

This is important for India for two reasons: to move up the value chain and, more importantly, build an R&D culture in the country. A Nasscom survey has highlighted that more than 50% of product entrepreneurs in the country have worked in the R&D labs of these global organisations. In such centres, the business risk is entirely borne by the parents who typically also hold the intellectual property. Any attempt to attribute part of the global profit of the parent to the assigned R&D effort has no economic basis.

While India is today the leading global sourcing destination, many other countries are emulating the Indian model and building a strong incentive framework for attracting global investment. Tax sops, training grants, access to domestic contracts, subsidised infrastructure - the list creates a very strong 'pull' in an era of cost cuts. The Philippines already claims that it is the global leader in the call-centre business; the R&D investments in China exceed those of India.

Our nation cannot tolerate a fundamental mistrust between business and government that is seen by some as shaping the current issues! Consistent with international practice, export of goods and services from India also are relieved wholly from the burden of domestic indirect taxes. Accordingly, exporters of IT services have sought legitimate refund of the service tax paid on input services. But unfortunately, the refund claims are rejected repeatedly.

One of the major incentives in SEZs was that of incometax exemption on profits from exports. But what the government gave with one hand, it seeks to take away from the other. And that was imposition of minimum alternate tax (MAT), which has virtually made the SEZ scheme dysfunctional particularly for the small enterprises that are already cashstrapped.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Internet Marketing Website Marketing Internet Promotion Internet Marketing India Website Marketing India Internet Promotion India Internet Marketing Consultancy Website Marketing Consulta

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions