Five-year tax-holiday for IT sector proposed

Five-year tax-holiday for IT sector proposed
Ens Economic Bureau

DEC 25: The Federation of Indian Chambers of Commerce and Industry (Ficci) has called for five-year tax holiday for the software industry. This will enable the industry to develop in the area of e-commerce.

In order to promote exports of software and related services, Ficci has said that gradual phasing-out of section 80 HHE must be stopped. It has called for sustaining the benefits given to software development for atleast another 2-3 years. If need be, the same should be phased out only after 2003 under section 80 HHE.

In a memorandum submitted to the government, Ficci said there was a need to lower the corporate tax rate. It feels that countries which have higher rate of taxation and complex rules and regulations would face problems because the operators can transfer their activities from one country to another country where they find that the rate of taxation is less or the rules and regulations simple and taxpayers friendly.

Ficci has called for having framing rules and regulations to monitor e-ecommerce. Unless this happens, taxing e-commerce would be difficult, the chamber said.

A uniform commercial code is important as the emergence of electronic market place will make it very difficult for individuals to search and access the legal and financial well-being of potential trading partners.

Ficci has also called for international co-operation, particularly in treaty negotiations in the field of source, residency, permanent establishment and allocative rules to provide rules to provide more opportunities to Indian businesses particularly the small ones to conduct electronic commerce.

The term royalty should clearly identify e-commerce related payments which are intended to be within its scope.

The definition and scope of section 9(1)(i) of the Income-Tax Act in relation to business connection should be brought in line with the definition and scope of the term permanent establishment under tax treaties and specifically provide for instances and situation.