Our Bureau

New Delhi, Feb. 27

THE IT industry is hoping that the key sectoral issues pertaining to Fringe Benefit Tax, BPO taxation and the current CENVAT overflow arising out of nil excise duty on finished hardware products are addressed in the Union Budget on Tuesday.

ThenNational Association of Software and Services Companies (Nasscom) has asked the Government to keep sales and promotion expenses, meal-related expenses, and medical insurance out of the ambit of FBT. It is also pushing for parity between the BPO and software companies, with regard to FBT treatment. Currently, in the case of companies manufacturing software, the value of fringe benefit for conveyance, tour and travel stands at five per cent instead of 20 per cent applicable on BPOs.

Further, the industry has said that the Income Tax law should be amended to provide that "arm's length price" for outsourced work be determined only on the basis of activities performed by the IT-enabled BPO unit in India without attributing any profit to the non-resident outsourcing work to India.

The hardware industry, under the aegis of Manufacturers Association of Information Technology, has asked the Government to address the anomalies in the existing excise structure such that that there is a seamless CENVAT chain, and no resultant increase in product prices. Currently, countervailing duty and excise levy on components is pegged at 16 per cent, while there is no excise duty on the finished product.

The India Semiconductor Association (ISA) is seeking tax breaks for investors in mega semiconductor projects.

"The Government will need to look at measures to improve the investment climate. The Government policies should encourage investments into semiconductor ventures by offering tax breaks," Mr Rajendra Khare, Chairman of ISA, said.

ISA is also seeking a larger role for Indian public sector undertakings in the funding of semiconductor manufacturing projects . It has also pushed for encouraging domestic value addition by suggesting tax breaks in local indirect taxes.

(This article was published in the Business Line print edition dated February 28, 2006)
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