BENGALURU: Indian software exports companies asked government to restore tax incentives for SEZs (special economic zones) and provide fund skills development and for more clarity on transfer pricing in a bid to remain competitive.
SEZs, which were hugely influential in kick-starting the IT revolution in India, have not been able to scale up due to flip-flops on the regulatory framework in terms of providing fiscal incentives.
As a result, a large number of SEZs remain underutilized, underdeveloped and several investors have exited, opine industry watchers.
“Exports are still a priority in the country and there is a need to restore tax incentives for SEZs,” says Kris Gopalakrishnan, retired Infosys co-founder. According to Sean Narayanan, Partner at LiquidHub, this move will bring more investments and reinvigorate new SEZ developments, which has almost come to a standstill.
According to the Finance Act of 2011, which broadened the scope of Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT) by bringing in SEZ developers and units under the ambit of MAT, thereby diluting the benefits offered under the SEZ scheme, sparked off the boom in the Indian IT sector.
“DDT discourages the healthy investment environment as it increases the cost of doing business,” said Samir Dhir, EVP and Head of India Operations, Virtusa.
The Centre has been contemplating and according to reports, Commerce Secretary Rajeev Kher, in December had said that there will be a decision on MAT and DDT in this Budget.
Then there is the issue of taxation. In 2013, Wipro was slapped with an ₹816-crore claim by Bengaluru tax authorities after it had served similar notices to Infosys, WNS and IGATE.
“Taxpayers face a situation where tax disputes have been accumulated over a period of years and litigation is prolonged resulting in an increase in cost and unnecessary hassle at the taxpayer’s end,” said Dhir.
These developments come at a time when $98.5 billion worth of exports clocked is under a lot of stress due to macro economic factors, increased commoditisation of software services and a workforce that is struggling to meet the new demands coming from its clients.
According to Aloke Ghosh, CFO, Blue Star Infotech, the Centre should look to introduce special monetary incentives for companies that invest in R&D. “These incentives can lure companies to invest in R&D and remain competitive,” says Suresh Venkatachari, Chairman of 8K Miles.
According to Srinivasa Chaitanya Mudunuri, CEO of Raybiztech, initiatives to nurture more engineering talent and boost the skilled manpower in the country is the need of the hour as companies are finding it increasingly difficult to train engineers.
