Tax sops to boost India's IT competitiveness: Nasscom

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SME Times News Bureau | 21 Sep, 2019
Terming the tax relief as a positive step to promote growth, investment and jobs, the Indian IT industry's apex body Nasscom on Friday said the bold measures would increase India's competitiveness in software services and products.

"The Union Finance Minister's announcements in New Delhi earlier in the day will help improve the Indian IT industry's global competitiveness and allow spends on incubators help boost creation of a tech ecosystem," said the apex body in a statement here.

Noting that the reduction in effective corporate tax to 25.17 per cent from 30 per cent will empower tech firms, the industry body said the benefits would create a vibrant ecosystem and the economy as a whole.

"For firms entitled for the earlier reduced basic corporate tax rate of 25.17 per cent, the reduction will be 3.95 per cent from the effective tax rate of 29.12 per cent," said the National Association of Software and Services Companies (Nasscom) in the statement.

As benefit of the reduced corporate tax of 25 per cent was not available to many IT/ITeS sectors that did not meet the revenue threshold, the industry body had earlier sought continuity of the SEZ tax holiday by removing the sunset clause.

"While the SEZ sunset clause has not been extended, companies claiming tax holidays, whose effective tax rate (after claiming tax holidays) is higher than the peak 25.17 per cent can now choose to give up the tax holiday claims and benefit from the new tax rate of 25.17 per cent," said the statement.

For companies continuing to claim tax holidays and not opting for the switch have a reduced MAT rate of 17.47 per cent as against the earlier 21.55 per cent, which helps them in reducing the cash tax outgo.

IT firms setting up after October 1 with investments in the hardware or fab sector to commence production before March 31, 2023 will be benefitted by the incentivised corporate tax rate of 17.01 per cent.

"Abolition of Minimum Alternate Tax (MAT) for the new firms is a great incentive to manufacturing units, which will also benefit from the rebate the finance minister announced on September 14 to boost exports, replacing the Merchandise Export Incentive Scheme (MEIS)," said the apex body.

Expressing relief over the buyback tax exemption for listed firms which announced such schemes before July 5, the IT body said the clarification would encourage even other companies to go for it.

"The tax reductions and exemptions will help the industry and the government to improve opportunities for all sectors to achieve the $5-trillion economy mark by 2024," said the statement.