Wednesday, January 7, 2015

Leverage ICT for Digital Transformation & Success of Make in India



To leverage the global competencies of the ICT sector and also enable the IT industry to map a sustained growth plan, The National Association of Software and Services Companies (NASSCOM), has shared its budget recommendations with the government. As part of the recommendations, NASSCOM highlights necessary aspects that can promote a healthy growth oriented business environment for existing players, innovation driven start-ups and SMEs.

The emergence of a rapidly growing ecosystem for innovation; driven by young, tech savvy entrepreneurs is a powerful new complement to the existing global reach of the industry. The SMEs and technology Start-ups need an environment of constant nurturing including access to funds, incentives to support operations and a simplified compliance framework. On the other hand large enterprises require stable policies and predictable regulations to continue its global journey.

While talking about the recommendations, R. Chandrashekhar, President, NASSCOM said “The Government has been progressive and has committed to adopt technology for governance. With enabling policies and speedy implementation, we can surely realize the Digital India vision. The success of the flagship initiatives of the government - Digital India and Make in India not only offer tremendous opportunities for the innovation driven technology Industry, but its success also hinges   on the sustainability and continued growth of the technology driven sector. Hence, factors that can potentially restrict growth and innovation needs to be addressed.”

Some of the salient recommendations by NASSCOM are:
* Addressing regulatory and tax challenges for technology start-ups and SMEs, like
* Difficulties in access to funding for low asset based firms
* Investor difficulties related to regulations and taxations discouraging investors
* Ambiguous Software product taxation and implementation issues adding to burden
* Incentives for technology start-ups and SMEs
* Extend provisions on deduction for employment and skill development (Section 80JJAA), R&D credits,
* Suggestions for new provisions like Offsetting manpower training cost, deferred tax  credits for start-ups
* Interest rates on penalty for service tax, for amount under litigation, should be rationalized. Rates introduced in the last budget are punitive @ 30%. NASSCOM acknowl­edges that companies who have collected service tax but not paid to the Government should be penalized and hence a 30% interest rate maybe applicable to such defaulters. For others, where there is a dispute over legal interpretation on applicability of service tax, a nominal rate of interest maybe notified
* To encourage growth of ecommerce, taxation on digital transactions should be in the least, at par with the physical world, if not reduced to facilitate adoption and migration to technology enabled platforms. This will help Government leverage the inherent transparency and traceability of online transactions
* Towards Make in India
* In recognition of the transformative impact of IT, extend incentives to the Indian Industry for adoption and implementation of IT tools for efficiency enhancement, ensuring sustainability and global competitiveness for the success of the Make in India program
* Revoke exclusion of expenses towards software tools for R&D from weighted deduction under the DSIR guidelines to encourage adoption of advanced R&D
* Policy revisions/ clarifications for expansion of the Industry
* Exports– Foreign Tax Credit policy, drawback scheme for Services, carry back­ward of business losses

* Domestic business – align royalty definition with international practices, clarify POPS rules, revisit

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