Software piracy causes Indian Govt $866 mn loss

BANGALORE, INDIA: A Business Software Alliance (BSA) - sponsored IDC whitepaper, “Software Piracy in India: Costing Millions to State Exchequer in Tax Losses”, yesterday stated that businesses who are otherwise legitimate, use software on a large scale but they evade paying tax when they are not buying licensed software, thus causing huge loss to the state exchequer and disruption of the domestic software eco-system.

For the Indian economy to realize the full potential of the value generated by the Indian IT industry, the paper said, it is imperative to curb revenue losses to the Government exchequer from the high rates of software piracy in India, especially in companies and organizations.

Also read: Reducing software piracy to boost Indian economy

The paper found that despite the growth in the IT sector, much potential revenues is lost due to software piracy. A study done by the IDC finds that the industry incumbents capture only one-third of the overall PC software revenues and the rest are lost to software piracy.

According to IDC estimates in the study in 2009, 65 per cent software piracy of packaged software caused loss of commercial value of unlicensed software that totaled over $ 2.27 billion, causing the domestic economy to lose US$5.3 billion of software, services and channels revenues to software piracy.

Also read: 86 pc of Indians prefer genuine software

Consequently, the state exchequer tax receipts loss was roughly $ 866 million at the current piracy and employment levels. The indirect tax receipts would have contributed $ 553 million from software (media and paper licenses) and services-related business transactions and direct tax receipts would be around $ 313 million for the Indian economy.

The study also found that reducing software piracy would stimulate spending throughout the IT value chain. Because of software’s unique role as a revenue generator for local service and distribution companies, three-quarters of the benefits generated by reducing software piracy are enjoyed by the domestic economy.

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“While the IT industry has consistently ensured the Indian economy maintain a high growth trajectory, it remains vulnerable to high rates of piracy in India resulting in lot of value erosion across various fronts,” said Keshav S Dhakad, chair, BSA India Committee.

He added that high incidents of tax losses to the Government due to software piracy hinder revenue generation for the State and there is an urgent need to facilitate the creation of a strong intellectual property compliance and accounting governance model in companies to account for usage of genuine and licensed software as part of their internal and external audits.