India IT firms pitch for simpler tax regime in budget

Friday, 02 July 2004, 19:30 IST
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NEW DELHI: India's high-profile IT industry expects the federal budget for fiscal year 2004-05 would focus on redressing anomalies in tax laws and rationalise the duty structure to ensure steady growth in the sector. The software and computer hardware makers also hope that the upcoming annual fiscal package would unveil measures to boost infrastructure facilities and education system to spur increased domestic as well as overseas investments. Finance Minister P. Chidambaram will unveil the Congress-led coalition government's maiden fiscal budget July 8. "While no new policy measures is expected in the budget, a little bit of tweaking here and there will ensure the continuity of the IT sector's robust growth," said Sameer Kochchar, CEO of tech industry research firm Skoch Consultancy. "The government must realise that its main goal of improving agriculture production, education and rural sector can easily be realised by using IT as an enabler tool," Kochchar told IANS. "Therefore, it must address some of the issues like anomalies in tax laws, low government technology spending and poor infrastructure that actually threatens to inhibit the growth of both software and hardware industries." On the taxation front, the IT industry wants the finance minister to take proactive steps to resolve various legal and taxation, both direct and indirect, related issues. These include allowing tax exemption to non-residents outsourcing the back-office processing and call centre activities in India and extending time limits of tax breaks to other allied sectors. "Irritants that are presently being faced on the taxation front need to be sorted out," said Kiran Karnik, president of the National Association of Software and Service Companies (Nasscom), India's IT industry umbrella group. "This should be done with an eye on maintaining cost competitiveness and providing a conducive regulatory environment," he added. Nasscom recommends complete exemption of excise and customs duty on computers so that manufacturers are encouraged to try and innovate and produce cheaper computers. "A major reason for the lack of computer penetration is the prohibitive cost of computers," said Karnik. "Due to smaller volumes, domestic hardware production has not picked up and continues to be expensive, with high import duties both on components and finished products adding to the costs." Karnik said the government should make the sale of computers to educational institutions as well as local communities exempt from all import and excise duties to significantly increase IT penetration. "Very large quantities of useable computers are discarded in developed countries. These second-hand computers should be permitted to be freely imported into India on a duty-free basis," he said. "And these should then be given on a free-of-cost basis to educational institutions and local communities. This will be a step in bridging the digital divide." Experts say the budget should also look at funding state governments' efforts in introducing e-governance and should exempt from all duties and taxes the purchase of computers and all other necessary equipments. "E-governance provides immense scope to improve delivery of services like education, medical care and information on a host of subjects to citizens in a very accountable and transparent manner," said Kochchar of Skoch Consultancy. "So, if the government is really serious about its agenda of all around rural development it must first encourage federal and state government investments in the field of e-governance." On the hardware front, the industry hopes that the budget would reduce excise duty on all IT products to a uniform eight percent from the existing 16 percent to make IT affordable all across the country. "The government must also look at promoting IT products manufacturing in the country by allowing income tax exemption for 10 years," said Vinnie Mehta, executive director of Manufacturers' Association of Information Technology. "Income tax exemption should also be accorded to earnings from technology of intellectual property licensed to overseas customers."
Source: IANS
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