IT & BPO: Tax sops for start-ups; funds for cyber security

BVR Mohan Reddy | Updated on January 27, 2018 Published on February 24, 2016


The technology industry is looking to Budget 2016 for a better business environment and ease of doing business. Startups and entrepreneurs are hoping for exemption from direct and indirect taxes including MAT, where start-ups lose a big chunk of cash flow.

The start-up ecosystem still lacks depth in terms of capital availability at the seed level. Over the recent years, angel investors have been helping these start-ups develop their ideas. The Budget has to roll out measures to encourage them.

As part of the Start-up India action plan, the Centre has announced plans to waive capital gains tax on investments in start-ups. It should also allow the companies to carry forward losses, even if there is a change in the ownership structure due to capital infusion in the entity.

There is still ambiguity in taxation rules around e-tailers in most States. Also, several e-commerce firms are facing challenges in shipping their goods to States due to compliance issues and, more recently, entry tax for e-commerce consignments. Such practices introduce barriers in adoption of technology and more efficient business models. The Centre should also consult the services sector as GST details are being formulated.

Pricing issues

The Indian IT industry has been facing challenges due to transfer pricing-related issues and would expect the Budget to address at least a few key elements like reducing safe harbour margins from the current 20-30 per cent. Also, foreign trade policies should extend the benefits of SEIS (Seed Enterprise Investment Scheme) to STPI (Software Technology Parks of India) units. Without such benefits, STPI units are at a disadvantage against SEZ (Special Economic Zones) units for the same services.

Also, the Centre should introduce better SEZ policies to boost electronics manufacturing in India. It should address the inverted duty structure and bring about suitable changes. The Budget should introduce more R&D benefits so that organisations are encouraged to innovate and develop new technologies. Also, considering the increasing level of cyber threats, the Centre needs to allocate a budget for the development of cyber security systems.

The writer is founder & Executive Chairman, Cyient, and Chairman, Nasscom

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Published on February 24, 2016
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