Budget 2014: Positives and negatives

NEW DELHI, INDIA: Here are both positive and negative reactions to Union Budget 2014, presented in parliment today.

Budget Reaction from Veerasundar Veluswamy, EVP & Chief Financial Officer CSS Corp:

Negatives:

• No major incentives for IT/ITES industry;

• Contrary to industry expectations, Minimum Alternate Tax (18.5% including surcharge & cess) still continues to apply for SEZ's . Also there was no indication about time lines for removal or reduction of MAT rates

• There is no change in the Corporate Tax rates (domestic companies almost 34% & foreign companies close to 43%). Industry expectations is that the Government would take steps to align India's direct tax rates in line with those in ASEAN to make Indian Industries internationally competitive.

• Retrospective amendment still continue but however case affected by such amendments will be handled by a committee;

• Non Deductibity of mandated 2% CSR expenditure for Income tax purposes

 

Positives:

• · Introduction of a "Roll Back" provision in the Advanced Pricing Agreement (APA) scheme so that an APA entered into for future transactions is also applicable to international transactions undertaken in previous four years in specified circumstances. This helps reduce long standing litigation affection the IT/ITES industry severely;

• Introduction of advance ruling for payments made to residents - This measure provides much needed clarity on the taxability of the transaction and avoiding litigation;

• To allow use of multiple year data for comparability analysis under transfer pricing regulations. This helps provide much needed respite/clarification from a long standing dispute pending before Indian Courts;

• Continuation of tax rate of 15% on foreign dividends received without any sunset clause. This helps continue the cash repatriation from foreign arms of India IT/ITES companies