Finance minister Yashwant Sinha is slated to include a package of incentives for the software sector in his reply to the Finance Bill later this month .
Besides a host of tax incentives, the possible extension of infrastructure status to the infotech sector, more liberal overseas investment norms and permission to venture capital enterprises to issue sweat equity, the government is also expected to clear the issue of two-way fungibility of American/Global Depository Receipts floated by software companies.
The finance ministry, which is presently discussing the subject, is expected to commission a meeting soon to effect the necessary changes in the GDR/ADR guidelines, top sources disclosed.
"Fungibility is a complicated issue. We are looking to work out an appropriate mechanism. Dual-listing can be easily permitted with a few changes under the present GDR policy," a senior finance ministry official said.
On the issue of sweat equity, the Department of Company Affairs has already given its in-principle nod to the proposal of the Department of Electronics to amend the Companies Act to make the scheme more attractive.
Sweat equity denotes capital which is issued for considerations other than cash. With the professionalisation of corporate operations, sweat equity has become the ideal tool for pooling together the expertise of a professional manager and an entrepreneur to set up professionally run organisations.
Initially, the professional manager brings in only his expertise while the entrepreneur brings in the capital. Over a period of time, the manager earns shares in lieu of his salary or part of his salary, which permits him to become a shareholder instead of being just the manager. As a result, the manager could build substantial shareholding in the company, which acts as an incentive for him to stay on with the organisation.
The proposal suggests that a new section may be added to the Act, wherein any computer software company whether listed or unlisted, engaged in the development of software may allot equity provided that: _ it be limited to 33.33 per cent of the paid-up capital of the company; _ be approved by the members of the company by a special resolution; _ proper disclosures have been made in the annual accounts in the year.
The government is also considering more liberal foreign investment norms, wherein software export firms will be allowed to earmark a portion of their export earnings for acquisition of overseas software companies. In addition a meeting was commissioned last week by the Reserve Bank of India to address the request for using credit cards to effect payments over the internet for downloading software. Further, more flexibility in spending of the export earnings is likely to be permitted, sources said.
