Embedded software exporters evade corporate taxes
Monday, 11 November 2002, 20:30 IST
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NEW DELHI: Companies exporting embedded or technology software designs are evading corporate tax of 38 percent by clubbing their business with India's total software exports, admit industry sources. Embedded software designs used in telecom hardware and chip manufacturing are treated as technology exports and not as software exports as they are sold as licenses. These high-end designs are sold abroad like intellectual property rights (IPRs) and companies get royalties in return. Currently, embedded software designs attract corporate tax of 35 percent and an additional 10 percent surcharge. "Although India exports around a billion dollars worth of high-end designs in the international market, these exports are clubbed with normal software exports to avoid paying 38 percent tax," Vinnie Mehta, executive director of the Manufacturers' Association of Information Technology (MAIT), said. India's hardware companies want total exemption of corporate taxes on high-end designs to bring it on par with the country's growing software exports, he said. Multinational companies like IBM, Intel, Cisco, Texas Instruments, Cadence and many others have set up shop in India seeing the country's skill in microelectronics. There are 200 big companies, including Indian names like HCL and Wipro, operating in this area. Criticizing MAIT's move in backing the multinational companies' demand for tax exemption in high-end design exports, a senior official of the IT ministry said on condition of anonymity: "What do these multinationals want us (Indian government) to do? "If MAIT is asking for such sops then it is wrong. And if these companies are evading taxes they need to be caught and not given sops like zero duty," he contended. However, Mehta defended the hardware industry, saying India needs a uniform policy, be it for indigenous manufacturers or multinationals setting up shop in the country. "What about Indian companies like HCL and Wipro?" he asked. Used for back-end integration in hardware manufacturing and telecommunication, high-end designs are the only form of hardware India makes that can compete internationally, he added. "We need to encourage high-end design exports instead of forcing companies to club it with normal software services exports that get us no royalties or IPRs," Mehta said.
Source: IANS
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