The IT industry and Nasscom are looking at the forthcoming Budget with expectations at two levels. The first level is what directly concerns the industry. The first point at that level is the taxation issue. The government has empowered itself to tax foreign companies for profits generated out of a product or service of their Indian arm. We want the government to make it clear that the foreign company will not be taxed for imputed profits, while we do not have any objection to taxing the Indian arm.
If the foreign company were taxed on the basis of imputed profits, it would take away the cost advantage that brought the company to India in the first place.
We also want the government to allow a company to pass on the incentives on software export to its domestic software supplier, just as it is possible in the manufacturing industry. This will help in building a healthy eco system in the IT industry.
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