Destination Sri Lanka for Indian IT Companies? Service Tax – a good reason

By Vijay Kumar

A Sri Lankan IT/ BPO -sector delegation led by the Board of Investment (BOI) of Sri Lanka concluded a successful mission to Chennai, Bangalore and Hyderabad last week. The Mission: To attract Indian IT Companies, especially the smaller ones to Sri Lanka.

Why should Indian IT Companies try to relocate to Sri Lanka?

1. Difficulties in hiring the best talent, in India

2. High attrition rates

3. The appreciation of the Indian rupee, and

4. A high Service Tax of 12.36%

And what does Sri Lanka offer?

1. Low operational costs

2. In India, the best IT-related talent often migrates towards large companies. However, in Sri Lanka, it is possible for a small IT company to make a name for itself quickly and hire top talent because of its entrepreneurial culture.

3. An IT company based in India is liable to a 12.36% service tax on services to a customer in India. However, the same company would be exempt from this tax if operating and making the service to the customer from Sri Lanka.