Day after FM Show, Tech Cos, Startups Feel Left Out
Industry proposals like R&D credit, ease in e-goods import, relaxation in angel tax not considered
New Delhi: Even though the Union Budget 2017-18 gave a lot of importance to boosting the digital economy, the technology companies and startups were a tad disappointed since several of their recommendations were left out. These include proposals which extended research and development (R&D) credit to software products, easing of procedures for import of electronic goods and relaxation in angel tax – a long standing demand of the industry among others. Experts also said that there were very little measures for the IT industry except for one where TDS (tax deducted at source) for the business process outsourcing (BPO) companies has been reduced from10 to 2%.
IT industry body Nasscom welcomed the move to extend the time period for eligibility of the threeyear income-tax exemption for startups from five years to seven years, as most startups do not ma- ke profits in the initial years of their operations but it said that even the seven-year timeframe may be too less. “Most startups take more time to scale up and become profitable but we welcome the first steps taken by the government,” said Bishakha Bhattacharya, senior director at Nasscom.
There has been no relief on the issue of waiver on the tax which is imposed on angel investors. “We had also asked for tax parity between domestic investors and foreign investors which has not been done. Also, the benefits of Startup India are only applicable to com- panies which have been incorporated after April 2016. We had asked for the companies that came into being from April 2014 to be considered too,” she said.
While the industry has hailed measures such as the lower rate of taxation of 25% for companies with less than .₹ 50 crore revenue, rationalisation of labour laws, carry forward of MAT for15 years, it feels that demands of the software industry especially relating to software products may have been left out.
Sudhir Singh, policy expert at think tank iSPIRT said that the industry was looking at clarity on the definition of software products and whether they should be classified as digital goods or digital services.
“There are a host of other taxation issues regarding software products when they are offered as a service (SaaS), which need to be addressed,” he added.