Nothing much for IT-BPO industry in budget

New Delhi: Software body Nasscom on Friday expressed its disappointment over the budget as it has no fresh proposals for the USD 100 billion Indian IT-BPO sector even as the industry's request to exempt SEZ income from Minimum Alternative Tax has been ignored.

"There is no focus on putting the economy on a high growth trajectory; fiscal deficit reduction is through higher taxation rather than expenditure management; there is no roadmap on implementation of DTC and GST; and also issues of tax simplification, litigation (faced by IT-BPO sector) have not been addressed," Nasscom said in a statement.

It added that the continuing uncertain business environment would have negative impact on investment and therefore, growth as well.

However, Infosys Chief Financial Officer V Balakrishnan said the IT industry had not expected any big change in the tax regime.

"However, the industry requested some clarity and certainty on the application of tax laws. Hopefully, the Government will provide the necessary clarity through administrative circulars to bring in greater certainty on tax position for the industry", Balakrishnan said.

N Chandrasekaran, CEO and MD of country's largest software exporter Tata Consultancy Services said budget was pragmatic with "doses of good intentions for long-term growth".

"...but (the Budget) lacked short term punch to get growth going. For the IT industry, the request to exempt SEZ income from MAT has not been granted and this is disappointing," he said.

He, however, said the focus on R&D is good as the weighted deduction of 200 per cent for R&D expenditure in an in-house facility has been extended beyond March 31, 2012 for a further period of five years.

The IT industry was pushing for withdrawal of the Minimum Alternative Tax (MAT) on SEZ units and bringing in clarity in transfer pricing norms.

The MAT was increased to 18.5 per cent last year. This impacted the Indian IT firms, especially smaller players, as they were moving to SEZs after the exemptions under the Software Technology Parks of Indian scheme came to an end.

"It's a status quo budget for the IT sector this year. However there are some points that affect the ITeS sector," Firstsource Solutions MD and CEO Matthew Vallance said.

He welcomed the government's move to introduce provision regarding implementation of Advance Pricing Agreement (APA) to be introduced in Finance Bill.

"We welcome this move, this will provide tax assurance and help the government analyse a transaction before it takes place rather than waiting for couple of years till the assessment of tax return is started," Vallance said.

Most of the European countries, China, Taiwan, Korea, Japan and Australia have already included APA as part of their tax legislations.

The hike on service tax rate to 12 per cent will also impact the companies, Vallance said.