BENGALURU : The $143-billion IT/IT-enabled services sector is going through a paradigm shift on the back of increased commoditisation of traditional services and adoption of digital technologies. And, the sector is looking up to the government for some direction to tide over the temporary turbulence.
“Section 35(2)(AB) should be amended to include ‘information technology’ along with biotechnology so that there is a clarity that the weighted deduction would be available to an assessee engaged in production of computer software and business of information technology so that all R&D activities are enabled for weighted deduction,” said P N Sudarshan, partner, Deloitte Touche Tohmatsu India.
K V Ganesh, chief finance officer of Subex, an IT product company, says with the US administration getting more and more tough on visas and restrictions, things will change in the IT sector. “We want a roadmap from the government on how it plans to bring down the corporate tax from 30 to 25 per cent.”
According to him, there should be specific guidelines for minimum alternate tax. “This penal provision by the government where you need to pay taxes if you show profits in your account has gone up from 4 per cent to almost 20 per cent. So, the difference between a normal tax which is 30 per cent and a penal tax is only 10 per cent. Most IT companies in the SEZ are not taxed, but with the introduction of MAT the whole purpose of an SEZ was defeated.”
He believes the rules for place of effective management, which the government wanted to implement, should be looked at carefully as this will make most of the Indian IT companies having subsidiaries abroad liable to pay tax in India.
Ashok Soota, co-founder of Mindtree and executive chairman of Happiest Minds Technologies, pointed out that “the only thing which is going to be a little difficult is GST and they need to make sure it doesn’t create difficulties for the IT industry.”
There is also scope for double taxation, says Sudarshan. “The impact of equalisation levy is on the recipient foreign company at six per cent of the consideration for services to be witheld by Indian payers. If the home country does not give credit for equalisation levy, this could lead to double taxation. The government may examine the possibility of entering into reciprocal agreements for credit with countries that impose a similar levy.”