The IT industry has crossed an important milestone this year. It crossed the ₹100-crore mark in exports. But sudden spurt in restrictive trade practices that pose a potential threat to exports worries the industry. It seeks support from the Union Government certain policy measures to help it remain competitive globally.

The industry sees increased hostility as some countries like the US creating hurdles. Growing restriction on the entry of skilled professionals from India, making it costlier for global firms to hire talent from abroad and hindering movement of data and technology between countries are making it difficult for the industry.

The Nasscom, the apex association of the IT and BPO industry in the country, has about 670 offshore development centres in 78 countries, employing nearly 40 lakh people in India. “In order to counter rising global protectionist barriers, the sector relies on the government, and policy measures should ensure that the Indian IT industry does not face difficulties on home ground,” a top Nasscom executive said.

What it wanted the government was to remove uncertainties and bring in rationalisation in taxation to let the companies focus on their core activities and on expansion.

“There are issues related to the draft residency rules and foreign tax credit mechanism leading to inefficiencies and increasing cost of taxes. Any ambiguity in PoEM (Place of Effective Management) regulations could have an adverse impact on the IT sector, including on outward investments impacting expansion plans of Indian companies abroad as well as investments in India,” the Nasscom said.

The industry feels that PoEM regulations should be made applicable only to companies that are located in very low tax jurisdiction. Most developed and developing countries, which are preferred destination for business activity, should remain out of scope of PoEM.

MAT exemption

It calls for the exemption from paying MAT (Minimum Alternate Tax) on the dividend received from the foreign companies or at least levying concessional MAT tax rate in line with the normal tax rate. It also wanted the government to allow carry backward of business losses, which is in vogue internationally.

The association has come out with a 45-page document containing a detailed wishlist from the industry. This ranges from the policy and tax support to start-ups and SMBs to rationalisation of taxes.

As per the Finance Act, 2016, highest rate of depreciation under the Act has been proposed to be capped at 40 per cent from 2017-18. “This could adversely impact growth in IT-ITeS sector. A higher rate of depreciation will enable companies to re-invest in assets at a faster rate. Also, a high rate of depreciation will boost investment in the sector. We recommend that the rate of depreciation in respect of computer and software be retained at existing level of 60 per cent,” the Nasscom felt.

Padmaja Ruparel, President of the Indian Angel Network, says that start-ups are not seeking any patronisation from the government. But they want the (government) procurement policies conducive to start-ups so that they can aspire for a pie. “The government must allow start-ups to allot ESOPs to mentors as it would help them save cash. If this is allowed, start-ups can have more engagement with mentors,” she says.

The IAN also wanted the government to exempt start-ups from MAT for at least five years. “MAT could impact the cash flows of the fledgling start-ups and could result in stress,” she feels.

(With inputs from Rajesh Kurup in Mumbai and Ronendra Singh in New Delhi)

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