India biz laud govt's IT tax review

Indian government sets up committee to review taxation of country's IT sector, a move praised by companies, saying it will allay concerns of industry and investors.
Written by Jamie Yap, Contributor

The Indian government's move to review tax laws of the sector has been welcomed by local IT companies, saying it will give more clarity in taxation and make India an investment-friendly center.
The Times of India reported Monday that National Association of Software and Services Companies (Nasscom) president Som Mittal said in a statement the move will allay concerns of industry, global corporations and investors. He also thanked the Prime Minister for his proactive support in creating a committee to help address current issues faced by the IT sector and focus on implementing the Safe Harbor provision.

Safe Harbor principles are international disclosure practices to check litigations in transfer pricing--an accounting mechanism multinational corporations (MNCs) use to reduce tax liabilities, the report said.

Indian Prime Minister Manmohan Singh on Monday announced setting up a committee to review taxation of the IT sector, according to a separate Times of India report.

The committee will consult with stakeholders and related government departments to finalize the Safe Harbor provisions announced in the Indian Budget 2010, the taxation of development centers, and the tax treatment of onsite services of domestic software businesses. Development centers are entities set up by MNCs to carry out various activities such as product development, software development and analytical work, the report said.

Recommendations for taxation will be provided by Aug. 31 this year, it added.

Mittal said India being a major destination for global sourcing of technology and BPO (business process outsourcing), a consistent policy regime was necessary for the industry to continuously grow and innovate. "Multinational development centers have played a key role in building the industry, create best practices and demonstrate the overall value proposition of India," he said.

The committee will be headed by former chairman of the Central Board of Direct Taxes (CBDT), N. Rangachary, and is in additional to an earlier panel that was set up to review the General Anti-Avoidance Rules (GAAR) provisions to address the concerns of foreign investors, Times of India reported.

Editorial standards