NASSCOM has welcomed the
Union Budget 2016, while terming it as a mixed bag for the sector. The budget
reiterates the 7.6% GDP growth rate for the country and provides a slew of
incentives for the rural, agricultural sector to enable inclusive growth.
The annual budget
proposals set the policy direction for the country and Budget 2016 does
articulate the emphasis on accountability, transparency and governance.
However, in the backdrop of global economic volatility, there are unmet
expectations on policy announcements that enable ease of doing business for our
sector.
Mohan Reddy, Chairman,
NASSCOM said “Our wish list for Budget 2016 included three key
priorities – policy bottlenecks including ease of business; nurturing
start-ups, products and ecommerce sector; and clarifications on transfer
pricing to enable inward investments in India. Budget 2016 only partially
covers these priorities. Extension of Section 10AA for SEZ units till 2020 is a
positive outcome though the imposition of MAT on startups will not allow the
full impact of the benefits to be realized”
R. Chandrashekhar,
President, NASSCOM said, “The finance
minister’s speech had a strong emphasis on leveraging technology to transform
India. The initiatives announced today combined with swift implementation of
Digital India will help to digitize India and provide effective citizen
services. We would urge the government to move forward at a swift pace and
build an effective PPP model”.
NASSCOM will continue to
work with the government to address procedural issues that impact the sector.
Key announcements
- Sunset date for Section 10AA of SEZ Act
extended till 2020. This will enable technology units to set up and commence
operations in SEZs
- Place of Effective Management deferred by 1
year: A key ask to provide an opportunity for deliberations and address
concerns on the provisions.
- Section 80 JJAA now applicable to services
companies as well, is a boost for BPM companies who have been at the forefront
of creating employment
- Extensive emphasis on technology adoption by
the government across SMBs, land record modernization, Aadhar adoption,
procurement platforms etc
- Startup India announcement of 3 year income
tax exemption welcome, though continuing MAT imposition a dampener.
- Holding period for investment in unlisted
companies to qualify for long terms capital gains tax reduced from 3 to 2
years. Our recommendation was for 1 year in line with investments in listed
shares
- High Level Committee chaired by Revenue
Secretary to oversee fresh case where the assessing officer proposes to assess
or reassess the income in respect of indirect transfers by applying the
retrospective amendment
- Section 206AA amended to ensure TDS shall not be
deducted at a higher rate in case of non-residents not having PAN, as per the
DTAA provisions
- Interest rates on delayed payment of
duty/tax across all indirect taxes being rationalized at 15%, with some
exceptions.
- Clarity on full CENVAT credit for input services
exclusively used in taxable output streams.
- DTAA benefits of reduced or NIL withholding tax
for payments made to non-resident investors by AIF (category I and Category II)
restored, and 10% withholding removed.
- BEPS action plan - Country-By-Country Report and
Master file applicability from 1st April 2017
- Equalisation levy on consideration for any
specified service received or receivable by a person, being a non-resident.
Specific service currently includes online and digital advertisement
Key proposals not
addressed
- Removal of dual levies on software products
not addressed
- Domestic investors continue to face higher tax
rates - Angel taxation, higher long term capital gains tax
- Revision of criteria to carry forward losses
to allow for capital infusion in business not considered
- Transfer pricing issues related to safe harbor
margins, APA roll back rules not notified
- Rationalisation of tax structure awaited. So
far announced for new units in manufacturing set up on or after 1 March
2016
- No roadmap on MAT and different cess
rationalization
- R&D credits not applicable for technology
sector, lowering of deduction rate not conducive to encouraging tech R&D
- Clarifications not provided on place of
provision of service rules
Other Reactions from India Inc
"Enhanced investment in the budget
for infrastructure, agriculture, rural and social sectors would support India’s
continued journey of inclusive and sustainable growth. Protected and secure
technology infrastructure fostering engendering trust will be critical to
success of projects like e-marketplace, digital vaults for certificates and
e-procurement. Legislative backing for Aadhaar should have requisite privacy
provisions. Overall, a prudent budget, indeed!" Managing Director, India, Symantec.
The IET’s vision is also to build a
strong engineering ecosystem in India that contributes to the society in
resolving critical societal challenges. We are happy to note that the budget is
aligned with our vision and we see immediate opportunity from each section of
the society – government, corporate and academia to collaborate for economic
development. Digital literacy for 6 crore rural households combined with the
promise of 100% electrification will help increase education penetration in
Tier- 2 and 3 cities as well. To
sum up, the budget is certainly a welcome step for the common masses and in
line with the government’s vision to transform India” said Shekhar
Sanyal, Director and Country Head, The IET India.
“The budget has been
encouraging for startups and MSMEs, the provisions announced by the government
will not only help ease the hurdles startups face but also give budding
entrepreneurs the required boost. The positives from the budget can be taken
that the government wants to play the supporting role and that of an enabler to
the startup ecosystem. The Budget looks to provide important steps around
the ease of doing business, taxation, access to capital for MSMEs and skilling,”
says Dilip Modi, Founder and Chairman, SpiceConnect.
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