Royalty Payments on Software - Goods or Services?
FINANCE Minister Mr. Arun Jaitley addressed a meeting of the IT industry yesterday in connection with the coming Budget. The meeting was attended by the captains of the IT business and the top revenue officers.
The IT industry's wish list to the FM included:
1. Incentives for setting-up of data centers within the country. There is a need to give tax incentives for building infrastructure for large data centers and cloud services within the country to ensure data security as well as to have a big network of large software products companies within the country.
2. More budgetary allocation for digital literacy programme in order to make Digital India a success, to promote innovations by allowing angel funding, stable tax regime, direct tax benefits for the sector, tax benefits for cashless transactions, resolving issues relating to double taxation on software products, transfer pricing and duty drawback.
3. There is need for clarity on royalty payment on software products (whether goods or services)
4. Initiatives to improve overall business environment including ease of doing business and setting-up of a High Level Committee for industry interactions.
5. In order to make ‘Make in India' success, extend investment allowance for efficiency enhancing tools like IT products, remove exclusion for expenses towards software tools for R&D deduction, incentives for digitization of SMEs, tailor incentives for skill development and employment generation for SMEs and large companies, revision/clarifications on export related issues like foreign tax credit policy, drawback scheme for services, carry backward of business losses etc.
6. Clarity in service tax between domestic and overseas vendors for e-commerce and export proceed realization (SEZ).
7. There is need for MAT rate to be rationalized, applicability on transfer pricing on companies eligible under section 10A and 10 AA and introduce duty drawback scheme for software services like goods among others.