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Address tax issues, push data centre infra are Infy, Wipros' request to Arun Jaitley
January, 15th 2015

Top officials from IT, BPO and eCommerce sectors today requested Finance Minister Arun Jaitley to address certain issues related to taxation in the Budget 2015-16, and provide incentives for setting up data centres in the country.

They also suggested that the minister look at ways to help in growth of software product firms and start-ups in India, while drawing his attention to issues such as double taxation, VAT and treating of software as physical goods.

This was for the first time that the Finance Minister held an exclusive Pre-budget consultative meeting with the IT-ITeS industry. The Union Budget 2015-16 is to be presented next month.

The meeting was attended by Infosys CEO Vishal Sikka, Wipro CFO Suresh Senapathy, Tech Mahindra Executive Vice Chairman Vineet Nayyar, Nasscom President R Chandrashekhar, Flipkart co-founder Sachin Bansal, Snapdeal co-founder Kunal Bahl and other officials.

"We all shared our views around easing the efficiency of doing business and taxation and things of this nature. I met the Prime Minister in the morning and requested him to look at the start up scene. We are seeing some disturbing early signs that start ups find it difficult to do business in India," Sikka told reporters here after the meeting with Jaitley.

Collectively, the industry stressed on the need to provide a nurturing ecosystem for start ups, he added.

IT-ITeS industry body Nasscom's Chandrashekhar said that the industry stressed on clarifications and streamlining with regard to issues like Advanced Pricing Agreements (APAs) under the Double taxation Avoidance Agreements (DTAA).

"We brought out concerns with regard to procurement of technical equipment and services for the government especially in the areas of eGovernance," he added.

The industry also brought out the concerns with regard to taxations and incentives to promote and facilitate movement towards digital economy, Chandrashekhar said.

"Issues relating to incidence to multiple taxation or interpretation by States with regard to eCommerce and the treatment of eCommerce. Issues and difficulties to creators of products having warehouse as one of these places of business was also discussed," he added.

Senapathy said many issues were discussed like taxation, capital markets, ease of doing business, skill India, digital India, innovation India.

"We also discussed transfer pricing and the government is convinced that they want to improve ease of doing business," Senapathy said.

In an official statement, Finance Ministry said major suggestions include incentives for setting-up of data centres within the country.

"It was said there is a need to give tax incentives for building infrastructure for large data centres and cloud services within the country to ensure data security as well as to have a big network of large software products companies within the country," it added.

Besides, the statement said, the other suggestions made by the IT industry include promoting innovations by allowing angel funding, stable tax regime, direct tax benefits for the sector, tax benefits for cashless transactions, resolving issues relating to double taxation on software products, transfer pricing and duty drawback.

Besides, it added, the industry officials said there is a need for clarity on royalty payment on software products (whether goods or services).

Other suggestions include setting-up of High Level Committee for industry interactions for making the government's 'Make in India' programme a success, extending investment allowance for efficiency enhancing tools like IT products, removing exclusion for expenses towards software tools for R&D deduction, incentives for digitisation of SMEs.

There were suggestions for revision/clarifications on issues like foreign tax credit policy, drawback scheme for services, carry backward of business losses among others.

"Suggestions were made for clarity in Service Tax between domestic and overseas vendors for eCommerce and export proceed realisation (SEZ)," the statement said.

Recommendations like the need for MAT to be rationalised, applicability on transfer pricing on companies eligible under section 10A and 10 AA and introducing duty drawback scheme for software services like goods were also made, it added.

Representatives of eCommerce industry also participated in the pre-Budget consultations.

Snapdeal co-founder and CEO Kunal Bahl said: "Industry like ours was invited to give our views on how the government can participate on accelerating its growth. Overall it was positive."

The discussion covered encouraging the setting up of data centres in India, product software companies and the broader ecosystem of start ups in India, he added.

"We shared some of the current inconsistencies that we are facing on taxation piece and I think the government is very understanding of those and it will get sorted in due course," Bahl said.

Flipkart co-founder and CEO Sachin Bansal said: "We are happy GST is coming and in the shape that it is proposed. We made recommendation on India should get more data centre investments and that requires that some tax benefits for the industry while it is in a nascent stage."

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