IT minister to meet Nasscom, iSpirt today ahead of Budget

Software product startups, entrepreneur ecosystem to be at the core of discussions

Several representatives of information technology (IT) industry body Nasscom and software product think tank Indian Software Product Industry Round Table (iSpirt) will meet Communications and IT Minister Ravi Shankar Prasad in separate meetings on Tuesday in Bangalore, to share their expectations from the Union Budget 2014 and also discuss the road map for the sector in the future.

The closed-door meetings will be attended by several leaders of the Indian IT services and software product sectors.

While iSpirt is focused on software product startups and entrepreneurship, a major part of Nasscom's discussions will also be around the same, sources at the industry body said.

According to a pre-budget wishlist shared by Nasscom, it will root for changes in regulatory framework in order to ensure there is no “talent flight” in terms of start-ups being forced to move their location outside India to get funding, etc.

“Indian environment is riddled with challenges,” Nasscom said in its wishlist for Budget. “Funding is constrained as asset base is low and the IP (intellectual property) created is non-bankable. Therefore, there is total reliance on angel investors, venture capitalists and private equity. Investors are wary of the operating environment in India — concerns related to taxation, complex regulations in new companies law, difficult to exit, and almost impossible to close a business.”

Nasscom has urged the government to set up a technology entrepreneur mission with an initial capital of Rs 500 crore to address funding and infrastructure issues for start-up companies. Nasscom has also recommended to the government to help in setting up a framework for funding and investments into early and growth stage companies, and also simplify regulatory requirements.

Separately, iSpirt has asked for a clarity in direct and indirect taxes, in order to ensure that software products don't have to pay both service tax and excise. The think tank has also sought clarity on rules relating to research and development (R&D), and a push for Indian startups by encouraging Indian public sector companies, including banks, to buy software products from domestic firms.

“The critical distinction between software products and software services is lost and as a result software product companies have to deal with policies ill-suited for product business,” iSpirt said in a note.