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From an IT- BPM industry standpoint, the budget may be termed as positive, though some gaps remain. The Self-Employment Talent Utilisation, a ₹1,000 crore techno-financial and incubation scheme, and the ₹150 crore Atal Innovation Mission are aimed at creating an innovation promotion platform to foster R&D. But the larger question, the deployment of the ₹10,000 crore fund the industry has been eyeing, continues.
On the regulatory front, the intent to introduce a pre-existing regulatory mechanism to replace the prior permission system will have a major impact on the ease of setting up a business.
The importance of pricing in competitive strategy cannot be over-emphasised. Towards this, a reduction of tax on royalty, and on fee, for technical services, from a high 25 per cent to a moderate ten, are welcome moves. Domestic Transfer Pricing laws have been enmeshed in complexities, adding to woes. Earlier transactions with associated enterprises, even up to five crore in value, came under these laws. The threshold limit at ₹20 crores, as put forth in the budget, is four times the previous one. Ambiguities around some provisions such as director’s remuneration and associated entities also continue.
The move to authorise the Central Board of Direct Taxes to issue clarifications on the Foreign Tax Credit will help the industry move a rung up the global competitiveness index. NASSCOM has been outlining this need to support the growth of Indian MNCs.
Glaring missesNo steps have been taken to mobilise domestic investors. Angel Tax, not remotely angelic, continues despite our strong pleas and several rounds of discussions where the Government clarified that its intention was not to hurt the technology start-up ecosystem. The issues of dual levies of service tax and VAT continue, relentlessly. There is no apparent intent towards SEZ revival. Employment generation incentive threshold has been reduced from 100 new jobs to 50, a welcoming move, but restricted to the manufacturing sector, thereby reducing involvement of IT start-ups. In addition, R&D Credits and investment allowance have not been extended to include IT, thereby losing an opportunity to catalyse domestic investment in IT.
The writer is President, NASSCOM
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