IT industry lobby group Nasscom has urged the government to prescribe timelines for closure of advance pricing agreements (APAs).
The government should also notify safe harbour rules for entities with a turnover of up to Rs 1,000 crore and reduce the tax rate of the IT and IT-enabled Services industry to 15% from 17%-24%, said Ashish Aggarwal, vice president and head of public policy, Nasscom.
“This will make it competitive for MNCs to set up global capability centres in India. It will also help reduce tax litigation,” he said.
ETtech Budget Watch: Fintechs seek ‘priority’ tag, sops in 2023 Budget
The government should streamline APAs, Mutual Agreement Procedures (MAPs), regulations and benchmarking, added PN Sudarshan, partner and TMT industry leader, Deloitte.
Discover the stories of your interest
“The government should prescribe fixed timelines for the closure of APAs and enhance the bandwidth of the APA teams to reduce the huge backlog of cases,” Sudarshan said, concurring with Nasscom on notifying safe harbour margins for entities with a turnover of up to Rs 1,000 crore.
The government should also rationalise “the safe harbour mark-ups in line with the benchmarks available, and increase the applicability threshold,” he said.
The software companies’ association also suggested that the government should constitute an alternative dispute resolution body composed of members from revenue and industry, in place of a dispute resolution panel. This will help in resolving long pending disputes and increase the confidence of taxpayers, Nasscom said.
ETtech Budget Watch: Rationalised tax regime tops gaming, cryptos’ budget ask
“The DRP mechanism, which is at present a taxpayer-specific dispute resolution, needs to be replaced with a neutral alternative body,” Sudarshan said.
It will need members from industries, judiciary, and revenue to arrive at a balanced issue-based resolution to address common international tax and transfer pricing issues, he said.
The Indian tech industry has remained resilient since the onset of the Covid-19 pandemic.
The industry touched $227 billion in revenue in FY22 with an overall growth rate of 15.5%.
With over 59% share in the global sourcing business and over 1,400 global delivery centres in India, the IT-BPM industry is well placed to serve the global value chains, said Aggarwal of Nasscom.
ETtech Budget Watch: PEs, VC firms call for tax parity in upcoming budget
On startups Nasscom suggested enabling a facility for deferment of tax payment on Esops for employees of more startups than the 600-odd currently permitted.
This will help a growing pool of startups use Esops as an attractive tool to hire and retail talent, the industry body said.
Lowering tax on long-term capital gains earned by domestic investors to bring it on par with the rate applicable to foreign investors will remove a tax arbitrage and domestic investors will find it equally attractive to invest in Indian startups, Nasscom said.
It also said withdrawing an amendment requiring startups to explain the source of income of investors in startups will remove the hurdle of seeking investments from friends, family, and others.
To enable a stable business environment for foreign taxpayers and help them avoid unnecessary litigation, industry bodies also suggested exempting non-resident taxpayers from filing Form 3CEB where they are exempted from filing a tax return in India.
The equalisation levy paid by the non-resident may be allowed to be adjusted against tax demand and the equalisation levy deposited suo moto should be treated as advance tax paid by the non-resident taxpayer, Sudarshan of Deloitte said.
