FM assures to look into taxation issues forcing IT companies to register abroad

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The Union Finance Minister, Nirmala Sitharaman has assured to look into the issues of taxation that are forcing companies in the IT industry to register outside the country. The Finance Minister heard the requests for several founder-CEOs of IT companies and representatives from CII and FICCI during their interaction and she assured to address the issues concerning the software-as-a-service (SaaS) sector.

During the interaction the tech entrepreneurs from Tamil Nadu, India’s hub for the SaaS sector, highlighted that the IT products are set to lead to value creation by Indian IT and requested the FM to address the bottlenecks, the Times of India reported.

According to the report, Suresh Sambandam, founder of software firm Kissflow, told the Finance Minister that the SaaS sector was an opportunity worth $1 trillion and that it could play a vital role in the government’s goal of becoming a $5 trillion economy. However, due to several hurdles, the companies are being pushed to register their businesses abroad.

FM assured to look into issues

“Despite the changes in the business models, on the taxation front, the software is still treated as a consulting service and TDS is being levied on the sale of essentially a product and I requested the Finance Minister to look into it,” said Sambandam as quoted by the TOI. He added that the legacy system of filing software export forms for assessing the value of software needed to be done away with, as prices were transparent on the websites.

The Finance Minister responded positively to the issues raised by the IT industry representatives and asked them to send a detailed note to the ministry that she would look into, the report added.

Business leaders appeal for fiscal incentives

Issues were also raised by leaders of other industries, such as cement and healthcare. N Srinivasan, the MD of India Cements said that the price of coal has gone through the roof. What was $70 a tonne is now $170-$180 a tonne. There is an import levy of Rs 400 a tonne, and for pet coke it is 11%.

“Considering the steep increase, we have sought a reduction in levies,” the report mentioned quoting Srinivasan.

According to sources, the leaders from the healthcare sector sought from the Finance Minister fiscal incentives to set up hospitals in tier-II and tier-III cities, the report added.

Responding to the request of these industry representatives FM Sitharaman assured that the disinvestment plan “was on track” and the Development Finance Institution announced in her recent budget speech would be operational soon. Liquidity would no longer be a concern, the FM said.