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Grant full exemption from taxes on export profits till 2010: NASSCOM

NASSCOM has urged Union Govt to retain the full tax exemption under section 10A/10 B of the I-Tax Act to the industry. It has also asked for all taxable services provided in relation to software (both computer and IT) to be exempted from service tax.

india Updated: Feb 24, 2003 15:56 IST

India's apex IT software and service companies association, NASSCOM has urged the Union Government to retain the full tax exemption under section 10A/10 B of the Income Tax Act to the industry in the Budget 2003-04.

It has also asked for all taxable services provided in relation to software (both computer and IT) to be exempted from service tax.

In its pre-budget memorandum, NASSCOM president Kiran Karnik said: "The outstanding success of the IT software and service sector is an example of what government support and government-industry partnership can do. To build on this, Government should honour the commitment of full exemption from taxes on export profits till 2010, since investments and business plans have been made on the basis of this commitment".

This is all the more necessary, said Karnik, as the global economic scenario continues to be bleak and the industry is fighting competition from emerging countries. "We urge the government not to be shortsighted but look at long-term gains from this sunrise sector which has consistently contributed to the growth of the Indian economy."

NASSCOM has called for making suitable amendments in Section 10A/10B, which is holding back acquisitions and mergers. In addition, there is need to remove other minor regulatory and procedural hurdles, particularly with regard to Customs bonding, which is hurting ease of transaction for the software services sector, it added

"Import and re-export of equipment for embedded software work is another area where we need Customs to be far more positive", said Karnik.

The apex body has requested the Government to pursue vigorously the Totalisation Agreement with US and tax withholding issue with Japan and other countries to help Indian IT companies further their reach in these markets.

NASSCOM has also demanded a tax moratorium on e-commerce at least for the next five years. It asked the government to encourage Net-based transactions and not impose new and unnecessary regulations, bureaucratic procedures, or taxes and tariffs on commercial activities that take place on Internet.

As per the Income Tax Act, if an overseas branch office brings in profits from its overseas software activities into India, then it gets income tax exemption, whereas an overseas subsidiary for similar operations does not get similar exemption. NASSCOM has asked for this anomaly to be corrected, said Karnik.

First Published: Feb 22, 2003 18:24 IST