Nasscom seeks extension of STP scheme

BANGALORE, INDIA: In its pre-budget memorandum submitted to the Ministry of Finance, Nasscom has mooted the continuation of STP scheme beyond 2009.

Recommending the extension of the scheme and tax incentive under section 10A/10B for the next 10 years, Nasscom also called for broadening the eligibility criteria for Large Tax Payer Unit (LTU) scheme, Advance Pricing Agreements (APA) for upfront tax certainty and refund of service tax paid on services utilized for export of computer software and BPO services.

“Extension of STPI will provide level playing field between small and big companies, and between India and other countries. It will also help sustain growth of BPO sector,” said Nasscom in the memorandum.

“BPO is a new and nascent industry with great growth/employment potential. There is a strong case to nurture and support this industry. Extension of STPI is one necessary step.”

Broadening LTU scheme

Nasscom observed that the current eligibility criteria for LTU scheme is restrictive and several very large IT companies are not entitled to join the scheme.

The industry body has urged to expand the eligibility to those companies making annual remittances of Rs 50 crores or more as TDS. Nasscom also wanted companies receiving Rs 500 crores or more in revenues and those paying Rs 5 crore or more as service tax to be included in the scheme.

In terms of excise duty, Nasscom said that firms paying Rs 5 crores or more in CVD on imports since, Rs 5 crores or more in excise duty and CVD on sales to be included in the scheme.

Foreign Tax credits

Nasscom also suggested relevant provisions to be incorporated in the domestic law to provide a mechanism for allowing full tax credit. It recommended the set up a mechanism for advance pricing agreements on transfer pricing issues.

This will provide much-needed tax certainty and avoid protracted litigation against transfer pricing adjustments at the field level, said Nasscom.

“We strongly suggest that such an APA mechanism be included in the next Indian budget and that resources be provided to the new APA office to allow them to process the required rulings.”

Refund of Service Tax

The memorandum also asked for parity to be maintained between export of goods and services and also between services (taxable or non-taxable).

(This article was originally published on December 17, 2007)

(cmn@cybermedia.co.in)