Budget 2013 wishlist: IT industry expects policy changes

February 7, 2013

(Any opinions expressed here are those of the author, and not those of Reuters)

Despite volatility in the global economy, the Indian IT and business process management (BPM) industry has grown steadily and is set to cross the $100 billion milestone according to the National Association of Software and Services Companies (NASSCOM).

From a modest 1.2 percent in FY1998, the sector’s revenues now contribute around 7.5 percent of the country’s GDP. The industry provides direct employment to about 2.8 million Indians and indirectly employs 8.9 million people.

As part of this dynamic sector, we industry leaders expect some large-scale policy changes. The sector has the potential to keep India on the world map for the foreseeable future because of its growth and impact.

But tax policies go a long way in impacting foreign investments in the country. I hope that the government will revisit some tax issues the industry is facing today. Tax administration has become a sore issue. We are concerned about refunds pending at the tax office on account of both direct and indirect taxes. Existing hassles over tax issues must be resolved soon for the industry to grow further.

I also hope to see recommendations made by Parthasarathi Shome on GAAR and retrospective amendments in the Income Tax Act implemented in true spirit.

Many of us hope that the Minimum Alternate Tax (MAT) levied on special economic zones (SEZs), which severely affected investments in SEZ units is discontinued or reduced drastically to keep up the investment momentum.

I also second NASSCOM’s recommendations for clarity on transfer pricing. This issue has added to the complexities of the business. Confusion around taxation of multiple entities of the same group needs to be resolved soon.

I am optimistic about the way the government has recently focused on policy announcements. Yes, the government has swung into action with a slew of reforms but the BPM industry is still awaiting the big bang reform that will help the sector evolve from business process ‘outsourcing’ to business process ‘management’.

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