What would be the critical demands from the IT industry to the Government? What does the industry need in order to continually function in a seamless fashion?
Establishing a task force
There is a need to establish a task force comprising of representatives, both from the revenue department as well as the industry segment which includes Manufacturing, Services, Infrastructure and Government to evolve long term policies applicable to them.
Clarification of Place of Effective Management
In addition, there is a need to introduce clarification for Place of Effective Management (POEM) that was introduced in the 2015 Budget. The clarifications should cover:
- Alignment to international and bilateral treaties by ceding the prevalence of provisions in those if found favorable to the tax payer- this would cover availability of tax credit, exemptions for certain incomes from tax, applicability of lower rate of tax and carry forward and set off losses of the previous years
Shift towards products and platforms
The IT sector is facing a critical period and needs to step up by moving towards platforms and products. It is therefore necessary to provide incentives for such development, and also for re-training and skill-building; this should include subsidies, tax credits as well as easy financing.
Tax benefits to SEZs
Restoring tax benefits to SEZs – the primary users continue to be the IT sector. It is time that MAT exemption is granted to units in SEZs; also that the dividend distributed tax is exempted for such units.
Tax credit for the IT Services sector
IT products are eligible for research and development tax credit under Sec 35(2AB). IT services are incurring expenditure when compared to products, in making platforms and process improvements. A similar benefit should be endowed for such expenditure too for the IT services sector.
Review of the transfer pricing policy
Setting up of a committee to review the transfer pricing policy in the light of the various litigations in the recent years and come up with the revised guidelines.