Nasscom asks Centre to solve challenges for start-ups, SMEs

Indian IT industry trade body Nasscom on Wednesday shared its budget recommendations with the government, highlighting ways to promote a healthy growth-oriented business environment for existing players, start-ups and SMEs.

Nasscom has urged the Centre to address regulatory and tax challenges for technology start-ups and SMEs, like difficulties in access to funding for low asset based firms and difficulties related to regulations and taxation that discourage investors, besides ambiguous software product taxation and implementation issues.

With India slated to become home to 11,500 technology start-ups by 2020, the lobby body suggested the government should extend provisions on deduction for employment and skill development, R&D credits and introduce new provisions like offsetting manpower training cost and deferred tax credits for start-ups.

Nasscom president R Chandrashekhar said, “The government has been progressive and has committed to adopt technology for governance. With enabling policies and speedy implementation, we can surely realise the Digital India vision. The success of the flagship initiatives of the government — Digital India and Make in India — not only offer tremendous opportunities for the innovation driven technology industry, but its success also hinges on the sustainability and continued growth of the technology driven sector. Hence, factors that can potentially restrict growth and innovation needs to be addressed.”

The body also batted for the country’s $3.1-billion e-commerce industry, which has been growing at a breakneck pace. Nasscom suggested that taxation on digital transactions should be in the least, at par with the physical world, if not reduced, to facilitate adoption and migration to technology enabled platforms.

In a bid to take the Make-in-India campaign forward, Nasscom also recommended incentives to the Indian industry for adoption and implementation of IT tools for efficiency enhancement, ensuring sustainability and global competitiveness. It also urged the Centre to revoke exclusion of expenses towards software tools for R&D from weighted deduction under the DSIR guidelines to encourage adoption of advanced R&D.

Calling for certain policy revisions and clarifications, Nasscom rooted for aligning royalty definition with international practices, clarifying POPS rules, revisiting amendments made in CENVAT rules, lower TDS rates on Fees for Technical Services and clarification of transfer pricing related issues, some of which were addressed in the last budget but details are awaited.

It also advocated rationalisation of interest rates on penalty for service tax for amount under litigation.

“Rates introduced in the last budget are punitive @ 30%. Nasscom acknowledges that companies who have collected service tax but not paid to the government should be penalised and hence a 30% interest rate maybe applicable to such defaulters. For others, where there is a dispute over legal interpretation on applicability of service tax, a nominal rate of interest maybe notified,” Nasscom said.