Nasscom, which speaks on behalf of India’s outsourcing and IT industry, has asked the Narendra Modi government to remove unnecessary legal hurdles in the path of technology companies, and also set up a fund to promote innovation and entrepreneurship.
“It is recommended to launch an India Technology Entrepreneurship Mission (ITEM) to provide a supportive framework to technology start-ups and SMEs,” Nasscom said in a statement.
“Under this mission, difficulties related to taxation, regulations and funding environment to be identified and allocations made to address them to ensure a framework for funding and investments in low asset base IP driven early and growth stage of start-ups, simple regulatory requirements, incentives for IP creation and employment generation, policy interventions to mitigate cumulative tax liability from TDS, Service Tax, VAT, and prevent depleting cash due to needless temporary cash outflows towards taxes,” it added.
It pointed out that there were two types of IT companies in India at present.
Large IT services companies contributing 80 per cent of the Industry revenue, characterized by upfront revenue streams, high number of employees, relatively low investments and technology, and Start-up and SMEs that contribute the balance 20 per cent revenue. The second are characterized by higher upfront investment for software product (IP) development, non-bankable assets, without immediate revenue stream. These companies are drivers of innovation and require Government investment and support across all levels of growth, Nasscom said.
The association also asked the government to simply the tax code.
“The Government should work towards addressing the challenges of negative list like taxation of testing services and transactions between head office and branch office, renegotiate tax treaties, ensure cross border transfer pricing adjustments, introduce consolidated Income tax filing for Indian MNCs for easing compliance for Industry and Government, revisit notified Safe harbors, and clarify to bring in certainty in transfer pricing assessments. This will lead to significant base enhancement in the long term perspective.”
To generate employment in tier-II/III cities, NASSCOM wants the government to incentivize expansion into such towns and cities aiming at spreading employment opportunity.