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Times have been changing for businesses across the globe.

However, despite these ups and downs, the Indian IT industry has stood tall, and has been a consistent contributor towards development of the country, emerging as the most significant growth drivers of the economy with growth projections of $225 billion by 2020.

In addition to this, the industry has also positively impacted the lives of millions through contribution to the socio-economic parameters such as employment, standard of living and diversity.

The Indian IT-BPO industry to continue playing a pivotal part in India's transformation towards a knowledge economy fostering innovation and entrepreneurship, favourable regulatory environment is a must.

Keeping this in mind, every year, Nasscom and its members share a list of recommendations with the Finance Ministry to be considered for the finance Bill. These recommendations are aimed at ensuring a strong strengthened regulatory environment —with more rationalised tax structures, incentives for large and small enterprises, and STPs and SEZs that catalyse the growth of the sector.

Som MittalThe recommendations are aimed at addressing the critical issues faced by the industry which increases uncertainty and litigation, and impacts future investments.

Starting with MAT, at 20 per cent, it has created hardship on the cash flow position of companies and also impacts the re-investment required for growth. It should not be more than one-third of the normal tax rate and MAT on SEZ income should be withdrawn.

Transfer pricing
With the sunset of STP benefits, there has been denial of tax deductions for onsite services on one pretext or the other, which the exporters of IT services are entitled to. The Government needs to issue appropriate clarifications to state that onsite services are an integral part of IT services.

From a transfer pricing perspective, the industry has been facing several unwarranted assessments on the additions.

There is a considerable amount of subjective judgment in arriving at the arms length price of an international transaction between two associated enterprises.

Nasscom believes that the rules should be framed to notify the metrics for making transfer pricing adjustments. Moreover, safe harbour provisions should not have any threshold limits and Advance Pricing Arrangement, the standard international practice, should be introduced to reduce litigation.

Further, we also feel that with regards to treatment of software being 'goods' or 'services', prevalent ambiguities must be minimised and more clarity must be established to avoid dual taxation (i.e. both Central and State authorities have been demanding taxes on supply of software) which leads to additional burden on the industry.

This should be looked into the by all the governments collectively to arrive at a mutually agreed structure.

In the existing environment, where there is a perception of a policy paralysis, it is imperative that there is an enabling and supportive regulatory framework that spurs the growth of the IT-BPO sector.

These requests, if met with by the Indian Government will ensure that there is more predictability of the tax liability, reduced litigation and disputes and encouragement of future investments.

There is need for legislation to be implemented in letter and spirit, so as to deliver the maximum benefits to Nasscom member companies.

(The author is President of Nasscom)