While Welcoming Budget, Nasscom also Raises Industry Concerns
Mr. R. Chandrashekhar, President, NASSCOM welcomed the Union Budget 2015 as well as he raised few important concerns that the industry woulr like to showcase. Mr Chandrashekhar said, “Our wishlist for Budget 2015 included three key priorities – policy bottlenecks including ease of business, procurement challenges and nurturing start-ups. Budget2015 does cover some part of these priorities. However, some concerns remain and we would urge the government to address these issues on priority”.
NASSCOM budget suggestions which have been considered include:
- Government procurement reforms: Proposal for a Public Procurement Dispute Resolution Bill with a purpose to address contractual disputes related to Government Projects. This will give a fillip to Industry’s participation in domestic contracts.
- Nurturing start-ups: Setting-up of initiatives like Self-Employment Talent Utilisation (SETU), a Techno-financial and incubation scheme, and the Atal Innovation Mission (AIM) will help promote innovation across the industry. We await the details of the facilitative announcements for start-ups and hope to speedy implementation of the Rs 1,000 crore fund. Clarifications on taxation norms for foreign VCs are also positive.
- Policy clarifications announced
o Domestic transfer pricing applicability threshold has been increased from Rs. 5 crore to Rs. 20 crore
o Central excise and service tax registration in two working days through online submissions including digitally signed invoices will ease business processes
o Increasing the time limit to claim CENVAT credit from six months to one year aligns it with business cycles
o Reducing the rate of income tax on royalty and fees for technical services from 25% to 10% will increase technology adoption in the country through lower costs
o Authorising CBDT to issue clarifications on the Foreign Tax Credit will help the industry attain global competitiveness.
The government continues its focus on leveraging technology for development and governance goals. Announcement of electronic Trade Receivables Discounting System (TReDS) for SMEs, cashless economy, expanding direct benefits through JAM, implementation of GST from 1.4.2016 etc are some welcome announcements.
Some of the areas of concern include:
– Increase in tax rates for both service tax and net corporate tax rate
– Angel tax continues: Fair market valuation applicable to angel investments taxes capital receipts in start-ups.
– Dual Levies on software continues, and high rate of TDS (10%) on all software transactions including start-ups constrain cash flows
– SEZ revival: Nothing was articulated on issues like MAT
– No steps to mobilize domestic investors
– Lack of incentives to develop tier 2 / 3 locations, employment creation. Incentives announced in budget are restricted to the manufacturing sector.
– Measures for increasing access to government procurement for product companies and SMEs not provided
– Definition of royalty which is not aligned to global practices
– Place of provision of service related to export of testing of services etc.