The revenues of Informationtechnology/ITeS sectors are expected to sur pass the $100 billion landmark in Indian it sector. The Informationtechnology industry has been growing at a CAGR of over 22 per cent in the last decade and has been one of the key growth drivers for the Indian economy. It has contributed around 7.5 per cent to the country’s GDP in Financial Year 2011. It provides direct employment to about 2.8 million people and indirect Informationtechnology employment to about 9 million in associated sectors in india. Comprising four segments – Informationtechnology services, Informationtechnology enabled services (ITeS), software products, software development, portal development, website development, web application development, mobile app development, and engineering services and hardware, the industry is expected to generate revenues of $ 100.8 billion (Source: Nasscom india) in Financial Year 2012 compared to $ 88.4 billion in FinancialYear 2011, a growth of 14 per cent. As far as the budget is concerned, the Information technology industry’s expectations were modest. Among others, withdrawal of Minimum Alternate Tax on SEZ Units, introduction of Advance Cost/Pricing Arrangement (APA) and streamlining Service Tax refunds were expected. The Budget 2012 proposes to introduce APA for international transactions between related parties and has sought to simplify the Service Tax refund process in india.
These are steps taken the right direction and help reduce litigations to a large extent. However, its effectiveness would largely depend on how well these proposals are implemented. Extension of 200 per cent weighted deduction for in-house Research And Development for another 5 years for in-house Research And Development should serve the sector well as there has been a renewed focus on innovation Research And Development by the companies to move up the value chain in india. One the downside, purchase of packaged software would be subject to withholding tax with retrospective effect. This has been a contentious issue for the past few years and with the changes proposed in the budget in india, the overall cost is likely to increase. The Indian Budget also proposes to tax off-shore, outsourcing share sale transactions and introduces transfer pricing for domestic transactions. To conclude, one can end up by saying ‘all is not well’ in this budget, which could be directly linked to the clamor of the bureaucrats and its penchant for bringing in retrospective amendments to get over the legal hurdles. The author is executive director, Tax & Regulatory Services at PwC India.
Source: CIOL Bureau
These are steps taken the right direction and help reduce litigations to a large extent. However, its effectiveness would largely depend on how well these proposals are implemented. Extension of 200 per cent weighted deduction for in-house Research And Development for another 5 years for in-house Research And Development should serve the sector well as there has been a renewed focus on innovation Research And Development by the companies to move up the value chain in india. One the downside, purchase of packaged software would be subject to withholding tax with retrospective effect. This has been a contentious issue for the past few years and with the changes proposed in the budget in india, the overall cost is likely to increase. The Indian Budget also proposes to tax off-shore, outsourcing share sale transactions and introduces transfer pricing for domestic transactions. To conclude, one can end up by saying ‘all is not well’ in this budget, which could be directly linked to the clamor of the bureaucrats and its penchant for bringing in retrospective amendments to get over the legal hurdles. The author is executive director, Tax & Regulatory Services at PwC India.
Source: CIOL Bureau
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