Govt must rationalise harmless harbour margins, decreased interest charges on financial loans to improve ITeS, KPO, software package advancement

© Offered by Firstpost
Union Budget 2021: Govt really should rationalise safe harbour margins, decrease desire charges on financial loans to enhance ITeS, KPO, software package development

The 12 months 2020 will prolonged be remembered and analysed for a single party, the COVID-19 pandemic which has changed the way we reside, do the job and use technology. This has underscored a new urgency for digital connectivity and innovation, ushering in an era for the engineering sector that might final nicely beyond the pandemic.

COVID-19 has disrupted the way in which IT firms get the job done, with a substantial workforce working from home during the pandemic. Digitisation of operations, creation of digital income streams, seamless customer knowledge, and up coming-technology workforce versions are some of the enablers of digital acceleration that the pandemic has activated. Against this, difficulties and threats associated to cybersecurity and privacy of facts have the prospective to come to be major impediments for the expansion of the technological know-how sector.

The governing administration on its portion has performed a significant purpose in augmenting the achieve of IT providers across India in numerous parts these kinds of as digital payments, infrastructure assistance and electronic governance. Timely interventions by way of relaxations for remote performing, extending the sunset day for SEZ models, the extension of time for the realisation of currency trading receivables, environment up of a startup fund for conference the funding requirements of refreshing startups are some of the measures that augured genuinely nicely for the field.

In the ensuing Spending plan, from an total plan viewpoint, the marketplace is expecting enterprise-crucial and bold policy interventions to propel digital adoption throughout multiple industries, superior internet infrastructure and strong information defense routine. To reach a competitive taxation framework that is a prerequisite to bring in new investments in the sector, the government could think about extending the concessional tax amount of 15 percent to new SEZ models which make incremental work.

The industry will also welcome clarity with regard to tax-deductibility of certain COVID-related charges

incurred for facilitating the distant performing of personnel.

Offered that several international nationals had been stranded in India owing to travel constraints, in line with the OCED

tips, the authorities could take into consideration carving out exceptions from PE exposure on that count. The ailment relating to utilisation of SEZ Reinvestment Reserve for the intent of acquiring plant and equipment can further more be expanded to also satisfy the doing work capital specifications of the SEZ unit, owing to liquidity crunch brought about by COVID disruption.

To provide tax getaway to startups in a accurate feeling, the federal government can take into consideration exempting DPIIT recognised startups from MAT liability and extending the period for carrying forward of losses.

Owing to the world wide financial downturn brought on by COVID-19, it looks even much more persuasive for the government to rationalise the safe harbour margins as nicely as lower the desire costs on financial loans to ensure that India retains its world attractiveness in the ITeS/KPO/software package advancement and contract R&D space.

Even though the Indian Advance Pricing Settlement (APA) programme has been pretty successful, the government may perhaps think about increasing the workforce in the APA crew and introducing provisions which make APAs time-bound, which will aid in garnering extra participation in the plan by IT/ ITeS companies.

Presently, the Specific Economic Zone (SEZ) policies allow for short-term function from property only for a limited time interval in particular circumstances these kinds of as for staff members who are travelling, temporarily incapacitated, and so forth.

Offered the OSP relaxations and the ‘new normal’ way of agile performing, the sector expects the introduction of a much more liberalised regime.

Even further, with an elevated concentrate on export earnings, the authorities should forthwith announce the amount of

Provider Export from India Plan (SEIS) for FY 2019-20, increase such gains for FY 2020-21 and continue to allow these kinds of profit in the new International Trade Policy.

The resilience revealed by the sector all through the pandemic and the assistance that the governing administration has extended has improved confidence in the prolonged-expression growth story of the sector. Innovation and progress in the technologies sector will definitely be a critical issue in driving India’s broader digital ambitions. With the progress in electronic demand from customers and the emergence and adoption of new technologies, the foreseeable future of the sector looks both interesting and promising.

The writer is Husband or wife and Head – Corporate and Global Tax, KPMG in India.