BUDGET WISHLIST: IT and ITeS

CEOSPEAK: Neeraj Bhargava, CEO, WNS Global Services

"From a BPO industry perspective, we continue to urge further extension of the tax exemptions under STPI. In addition, clarity on Fringe Benefit Tax with regard to ESOPs is required to avoid double taxation. We also seek clarity on Section 10AA, which relates to tax exemptions for units under SEZs"

Chamber-Speak

FICCI
The existing tax holiday benefit under sections 10A and 10B for IT and software sector available upto 2009 should be extended for at least five years to help SMEs, which would not be able to migrate to SEZs, survive global competition. They are already getting hard-hit by rupee appreciation, MAT and taxation of ESOPs. Also the 8 per cent excise duty imposed last year on customised software and packaged software should be dropped

STATE OF PLAY

Indraneel Roy Chaudhury, Executive Director, PricewaterhouseCoopers

Continuation of STPI benefits and tax incentive under section 10A/ 10B beyond 2009 or the STP tax holiday removal for IT sector could be linked to the signing of the totalisation agreement with the US Government (as also recommended by Kelkar Committee). With regard to the ITES sector, as the work is predominantly offshored by the overseas entities, it is essential that the tax incentives continue in line with the SEZ policy.

APA (Advance Pricing Agreements) mechanism be introduced to assist in transfer pricing - imperative with the growing amount of litigations related to transfer pricing of multinationals. Learning to be taken from arrangements in overseas locations.

Introduction of safe harbour rules to simplify transfer pricing compliances for basic services providers. This will also help in limiting administration time considering the number of pending litigations.

Allow unspecified transfer pricing method to include any approach or method that is appropriate and consistent with the arm's length principle for determining the transfer price of the transaction.

Doing away with levying of FBT on sales promotion expenses incurred by companies and withdrawal of policy of levying FBT on stock options granted by MNCs to employees in India.

For the purposes of allowing full tax credit for services used as input services under the Rule 6(5) of Cenvat Credit Rules, the list of services under the said category should be periodically reviewed and updated.

Aligning service tax exemptions available to SEZ unit/ developer with STPI/ EOU and administration of Service tax only through registered authority.

Relevant provisions to be inserted under domestic law for allowing full foreign tax credit arising out of overseas operations.