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Budget 2013: IT sector seeks focus on infra and tax exemptions
February, 14th 2013

The information technology sector's wishlist for the Budget includes more spending on nation's cyber security and infrastructure as well as exempting hardware components from import duties.

While software industry body Nasscom hopes the government will spend more on IT-led development initiatives, hardware grouping Manufacturers Association of Information Technology is looking for more tax exemption.

"The government has recognised the role of IT, but we need important allocations in cyber security and entrepreneurship," said Bishakha Bhattacharya, director of government relations at Nasscom.

"There is a need for IT-led interventions in healthcare and education," said Bhattacharya. The industry body also wants the government to encourage technology-led entrepreneurship by simplifying tax rules for start-ups and by providing early-stage funding.Cyber security has come into the spotlight after some important websites-including that of the Supreme Court, the Congress party and the Cyber Emergency Response Team-were hacked recently. This has brought into question the country's readiness in handling such breaches.

India's IT sector, including hardware, has an annual turnover of about $100 billion, contributing 6-8% to India's overall gross domestic product. Bhattacharya urged the government to speed up the setting up of IT infrastructure required for the rollout of goods and services tax.

Ganesh Natarajan, CEO of Pune-based mid-sized IT/BPO firm Zensar Technologies and former chairman of Nasscom said the industry is hoping for "simplification of transfer pricing norms and continuity of Special Economic Zone scheme to encourage sector investments."

Transfer pricing norms comes into play when large corporations, such as the US arm of an Indian IT company, transfers work to the Indian unit. The provision and interpretation of laws that govern such transactions have been a cause for friction, with government sometimes accusing large IT firms for misusing the system to transfer profits to their subsidiaries in low tax countries.

For its part, the hardware sector wants exemption of customs duty on imported hardware components. Anwar Shirpurwala, executive director of MAIT, said there has been little focus on encouraging electronic goods manufacturing within the country and expensive tax structures often discourage those interested in setting up plants.

MAIT said it has also sought an extension of timeline for the payment of service tax by IT companies from the sixth day of the following month to the twentieth.

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