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

The Economic Times - - Disruption: Startups & Tech - Surabhi.Agar­wal @times­group.com

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.

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