It's a mixed bag for Indian IT industry

There has been a mixed reaction to Union Budget from the IT industry in the country,as some feel that this might prove helpful in the long run, others are of the opinion their demands have not been met.

Indian IT association Nasscom believes that Minimum Alternative Tax, introduced for SEZs in 2011, has adversely impacted the viability of investments already made by those companies. The budget does exempt the SEZs from the MAT, thus not heeding their demand.

Another Nasscom demand was the introduction of Advanced Pricing Agreement (APA) to help set fair and transfer pricing of transactions and provide certainty to firms in the future. However, Mukherjee has not addressed this issue immediately and said, “Though, the provision for APA has been included in the Direct Tax Code Bill, 2010, I propose to bring forward its implementation by introducing it in the Finance Bill, 2012.”

Mukherjee added that Advance Pricing Agreement (APA) can significantly bring down tax litigation and provide tax certainty to foreign investors.

“For the industry, which has been looking for greater clarity in transfer pricing, the move by the Finance Minister to implement the Advance Pricing Agreement is a serious recognition of the importance of cross-border trade in a globalised economy and would usher in greater tax certainty for foreign investors in the coming years,” said Cognizant Group Chief Executive (Technology & Operations),  R Chandrasekaran.

Commenting on the budget, CEO & MD, Tata Consultancy Services N Chandrasekaran said he was disappointed because the request to exempt SEZ income from MAT has not been granted. He, however, feels the the APA will help IT industry to ease transfer pricing litigation. Advanced Pricing, according to Deloitte, is welcome as Transfer pricing is a complex and disputes are unavoidable.

“APA will give certainty to both tax payers and tax authorities to arrive at pricing in advance and reduce compliance and administrative burden,” said Deloitte Haskins & Sells Partner, Samir Gandhi. Meanwhile, Nasscom said that the decision to increase Service Tax and Excise duty will increase cost of doing business in the country.