IT sector wants to help the country grow, with aid from the government

IT sector wants to help the country grow, with aid from the government

  • The Indian IT sector is looking at tax cuts and incentives from the Indian government’s upcoming Union Budget on Friday.
  • NASSCOM, the trade association of Indian IT firms, recommended that the Indian government set up effective SEZs and provide impetus to investment in R&D to ensure that India hits its $5 trillion GDP target by 2024.
  • FICCI and other Indian players in the India IT sector are also looking at incentives to upskill the workforce and seek clarifications on taxation laws.
The Indian IT sector might be the trump card that could turn India into a $5 trillion economy by 2024. But to be able to that, the sector needs a push, says industry body NASSCOM.

India’s IT industry which accounts for over 6.6% of the country’s GDP and employs 4.1 million skilled individuals; wants the government to clear the path for its growth.

And it is expecting some of the changes, this Budget. The trade association recommended that the Indian government introduce tax friendly Special Economic Zone (SEZ) policy for the next 20 years, give more incentives to push R&D investment, promote India as a start-up hub by encouraging funding and easing tax.

Yet another industry body FICCI also wants the government to entice global tech product manufacturers into the country with liberal incentives. It believes that the global demand for electronics, green technology, medical devices and other emerging sectors is going to rise in the next couple of years and it’s important for the Indian government to have measures in place, for their entry.

Incentives for R&D

Apart from manufacturing, the IT sector also wants to capitalise on the country’s intellectual capital. This, in turn can spur innovation and act as a catalyst to the growth of startups in the country.

Easy regulation can help, especially with regards to fintech innovation.

“Regulatory sandbox initiative needs to go live as quickly as possible starting with all the financial regulators enabling all the fintech players to develop more products in an accelerated manner - this will be a big boost for the fintech landscape of India,” said Saru Tumuluri, the CEO of Khosla Labs and provider of Veri5Digital.

The government should also help drive new-age technologies. Snehashish Bhattacharjee, Global CEO of Denave believes that the expectations have risen a notch since the Interim Budget.

“It held promise of greater focus on emerging technologies with plans of a National programme on Artificial Intelligence (AI) comprising establishing a national centre on AI along with Centre of Excellence (CoE). It is now important that the pace of the change is quickened and we hope the government will have multiple things in their bucket to offer in this section.”

Along with infrastructure, the government should also aid the growth of skills too.

“Initiatives like making National centre for Artificial Intelligence and building Centre of Excellence in collaboration with universities will open the path for the youth in India to leverage the new state-of-the-art development infrastructure and upskill themselves to widen the job opportunity pool for themselves,” said Rishi Bhatnagar, the President of Aeris Communications & Chairman IET IoT Panel India.

World leader for tech startups

Then, there is the long-standing request of an eased tax regime.

NASSCOM wants India to follow the example of Singapore and UK. They provide tax deductions to those investing in startups with an intention to improve their value.

It recommends that Long Term Capital Gains from selling shares of unlisted companies should be exempted from tax. And, Shorter Term Capital Gains should only be taxed at 15% rather than vary with an individual’s tax slab.

“Lowering the GST slabs in manufacturing devices can pose as an opportunity for the youth to lead India in this endeavour with innumerable innovative start-ups,” states Bhatnagar.

In order to incentivise startups, small and medium enterprises that have a turnover of less than ₹500 million should also be exempt from the Minimum Alternate Tax.

Taking away the 18.5% taxation rate of MAT would also promote the ease of doing business in India along with clarifying on how tax is treated once a contract is terminated or modified.

Saurav Goyal, the CFO of Money View, states, “The Government as part of the Budget should provide necessary clarity in terms of taxation norms and make a requisite change in the policies in accordance with the latest business practices, post factoring another regulatory requirement.”

Goyal also asserts that, going forward, India should follow and consultative model that can help the country comply with international best practices. That, in turn, will allow India balance its national interests while providing access to the global market.