“It’s a retrograde step targeting the Indian IT industry again to meet the healthcare costs in the US. It is a disappointing move,” said Infosys Technologies Ltd chief executive S Gopalakrishnan.
The James Zadroga 9/11 Health and Compensation Act of 2010, passed by the US Congress late on Wednesday, is aimed at raising $4.3 billion over the next five years by taxing goods and services sourced from countries like India, China and Thailand.
“The latest protectionist move is inconsistent with the ethos that were exchanged during the visit of US President Barack Obama to India,” Wipro executive vice-president Suresh Senapathy said.
This is an added burden as the bill came soon after the visa fee was hiked on Indian technology workers a few months ago to fund border security.
Meanwhile, on Thursday, Indian IT industry body Nasscom expressed concern that the Indian technology sector and overseas companies are becoming a target for US lawmakers. The move would mainly impact Indian IT companies, which earn about 60 per cent of their $50 billion revenue from exports to America. “US lawmakers seem to have developed a new practice of unfairly taxing foreign companies to pay for domestic issues,” Nasscom said.
Commenting on the Bill Nasscom president Som Mittal said the industry representative body did not expect the bill to be enacted into law so soon as the Indian position was already conveyed to the US government.
“Though the bill was in the knowledge of our government and the industry, we thought it may not go through in such a hurry, as the US Congress session was to break for Christmas and year-end holiday season,” Mittal said.
The most disturbing part of the development is that US continues to exhibit and practice indirect protectionism, by adopting policies that restrict free trade and are discriminatory trade practices, Nasscom added.
Dismayed over the move to even levy two percent cess on imports, Senapathy said the IT industry hoped that the Obama administration would take steps not to let the healthcare bill pass through the legislation.
“The consolation is the new Act will be applicable for five years (till 2015) as against the 10-year timeframe stipulated in the bill,” Senapathy said. Commerce Minister Sharma also expressed his concern on the bill on Thursday. He said the new law “will send a negative signal to Indian investors who have remained firmly committed to partnering American companies and have supported jobs even at the peak of economic crisis.”
Indian companies could also be impacted from a new two per cent excise charge that would be levied on goods and services purchased from contractors from certain countries outside the purview of WTO’s Agreement on Government Procurement.
The new procurement tax will also impact other countries such as China, Philippines, Malaysia and as well as those in Africa, the Middle East and Latin America.