 "IT sector asks FinMin for clarity on PoEM norms")
Representatives of the information technology (IT) and outsourcing sectors met Union finance ministry officials here on Monday, to give their suggestions for the coming year’s Budget. Representatives from leading IT companies had come, including Tata Consultancy Services, Infosys, Wipro and HCL.
“The government’s Make In India programme has included the electronic systems and IT&BPM (business process management) sectors among the 25 key sectors,” Finance Minister Arun Jaitley said at the consultation meeting, highlighting the contributions of the IT arena, adding India is one of the fastest growing economies in the world with its gross domestic product (GDP) growth having accelerated at 7.3 per cent in 2014-15, compared to 6.9 per cent in 2013-14 and 5.1 per cent in 2012-13, indicating the economy is on the path of economic revival.
The IT representatives wanted rationalising of the place of effective management (PoEM) norms. These draft guidelines, issued last month, were aimed to plug tax avoidance by multinational companies (MNCs), Indian or foreign. MNCs will be liable to pay tax in India if those who take key decisions conduct most of their meetings in India, even if the decisions are implemented in another tax jurisdiction, according to the draft guidelines. The proposed rules might force MNCs to locate their regional controller offices outside India, experts have warned.
“We have asked for clarity on rationalisation of PoEM norms and have also sought extension of special economic zone (SEZ) benefits (by three to four years),” said Anil Chanana, chief financial officer of HCL Tech, after the pre-Budget consultation meeting.
SEZs and national investment & manufacturing zones (NIMZ) get many tax benefits. SEZs get full income tax exemption on export income for the first five years, 50 per cent for the next five years and 50 per cent of the ploughed-back export profit for the next five years. NIMZ has provisions for tax incentives to small and medium enterprises.
“We flagged our concerns on double taxation on software products. While the GST (the proposed goods and services tax) will address that, we have suggested that some measures be taken to address the issue till the time GST comes into force,” said Rentala Chandrashekhar, the head of Nasscom, the apex sectoral association.
The government levies service tax on software of a foreign source downloaded from the internet; both value-added tax and service tax are levied on software purchased domestically. The IT sector has asked the government to provide a level-playing field between the two.
“The larger issue for Indian IT is to remain competitive, in view of the protectionist measures being taken in some large markets,” Chandrashekhar said.
The United States, a major source of business for sector majors, raised visa fees by a hefty amount last month for personnel deputed from here. They also urged the ministry to allow staggered bonus payment to employees. The labour ministry had issued an order on this effective April 2014.
“We have requested that retrospective orders be avoided. Now, the labour ministry rule on bonus has become a law,” observed Chandrashekhar. The companies also asked for one-time tax relief on measures taken in the aftermath of Chennai floods.
“The government’s Make In India programme has included the electronic systems and IT&BPM (business process management) sectors among the 25 key sectors,” Finance Minister Arun Jaitley said at the consultation meeting, highlighting the contributions of the IT arena, adding India is one of the fastest growing economies in the world with its gross domestic product (GDP) growth having accelerated at 7.3 per cent in 2014-15, compared to 6.9 per cent in 2013-14 and 5.1 per cent in 2012-13, indicating the economy is on the path of economic revival.
| RAISING RED FLAGS |
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The IT representatives wanted rationalising of the place of effective management (PoEM) norms. These draft guidelines, issued last month, were aimed to plug tax avoidance by multinational companies (MNCs), Indian or foreign. MNCs will be liable to pay tax in India if those who take key decisions conduct most of their meetings in India, even if the decisions are implemented in another tax jurisdiction, according to the draft guidelines. The proposed rules might force MNCs to locate their regional controller offices outside India, experts have warned.
“We have asked for clarity on rationalisation of PoEM norms and have also sought extension of special economic zone (SEZ) benefits (by three to four years),” said Anil Chanana, chief financial officer of HCL Tech, after the pre-Budget consultation meeting.
SEZs and national investment & manufacturing zones (NIMZ) get many tax benefits. SEZs get full income tax exemption on export income for the first five years, 50 per cent for the next five years and 50 per cent of the ploughed-back export profit for the next five years. NIMZ has provisions for tax incentives to small and medium enterprises.
“We flagged our concerns on double taxation on software products. While the GST (the proposed goods and services tax) will address that, we have suggested that some measures be taken to address the issue till the time GST comes into force,” said Rentala Chandrashekhar, the head of Nasscom, the apex sectoral association.
The government levies service tax on software of a foreign source downloaded from the internet; both value-added tax and service tax are levied on software purchased domestically. The IT sector has asked the government to provide a level-playing field between the two.
“The larger issue for Indian IT is to remain competitive, in view of the protectionist measures being taken in some large markets,” Chandrashekhar said.
The United States, a major source of business for sector majors, raised visa fees by a hefty amount last month for personnel deputed from here. They also urged the ministry to allow staggered bonus payment to employees. The labour ministry had issued an order on this effective April 2014.
“We have requested that retrospective orders be avoided. Now, the labour ministry rule on bonus has become a law,” observed Chandrashekhar. The companies also asked for one-time tax relief on measures taken in the aftermath of Chennai floods.