Nasscom Welcomes New Government Pre-Budget Policies on ICT & ITes

NASSCOM and the IT industry welcomes the focus of the Union Government on leveraging ICT for economic growth, and maximize reach of its policies for national development agenda. NASSCOM will continue to work closely with the Government and play the role of catalyst in implementing its governance agenda.

The Indian IT industry is no longer a monolith. Instead, there are two distinct segments that have different asks.

* Large IT services companies contributing 80 per cent of the Industry revenue are characterized by upfront revenue streams, high number of employees, relatively low investments. This segment requires regulatory predictability, stability and clarity, removing distortions in implementation and minimizing litigation which deter growth.

* Technology Start-up and SMEs contribute the balance 20 per cent revenue and are characterized by higher upfront investment for software product (IP) development, non-bankable assets, without immediate revenue stream. These companies are drivers of innovation and require Government investment and support across all levels of growth.

As the new government sets itself to decide upon budget 2014-15, NASSCOM, on behalf of Indian IT-BPM industry recommends the following interventions to government.

* In order for the industry to contribute on its role as a transformation agent and participate in the governance of the government, it is vital for the government to remove the impediments for the Industry and encourage the adoption of IT in government. NASSCOM would request the Government to streamline procurement process for technology products and services including SME participation, settle long pending dues on projects executed for Central and State Govt. and provide incentives for adoption of IT across sectors.

* It is recommended to launch an India Technology Entrepreneurship Mission (ITEM) to provide a supportive framework to technology start-ups and SMEs. Under this mission, difficulties related to taxation, regulations and funding environment to be identified and allocations made to address them to ensure a framework for funding and investments in low asset base IP driven early and growth stage of start-ups, simple regulatory requirements, incentives for IP creation and employment generation, policy interventions to mitigate cumulative tax liability from TDS, Service Tax, VAT, and prevent depleting cash due to needless temporary cash outflows towards taxes.

* In order to induce predictability, clarity and stability of taxation regime, the government needs to induce confidence building measures for the industry on business environment, enhance job creation and making India a preferred destination, NASSCOM requests the Government to clarify the royalty implication on software (both retrospective and on services), eliminate MAT on SEZ, and take steps to minimize litigations.

* The Government should work towards addressing the challenges of negative list like taxation of testing services and transactions between head office and branch office, renegotiate tax treaties, ensure cross border transfer pricing adjustments, introduce consolidated Income tax filing for Indian MNCs for easing compliance for Industry and Government, revisit notified Safe harbors, and clarify to bring in certainty in transfer pricing assessments. This will lead to significant base enhancement in the long term perspective.

* Finally, in order to generate employment in tier-II/III cities, NASSCOM recommends incentivize expansion into such towns and cities aiming at spreading employment opportunity, ensuring balanced growth, drive urbanization across country and encourage overall competitiveness of the Industry.