Nasscom Says Government Should Extend Corporate Tax Rate Of 15% To New Services Companies In SEZ

Nasscom has submitted its pre-budget wish list to the government ahead of the Union Budget 2020. The industry body is focused on taxation and the measures that may be undertaken to use tax policy to drive India's global competitiveness with a focus on technology sector. In a global competitive landscape, India has three distinct advantages - talent, scale and cost competitiveness. Compared to developed economies of the world, India has always had a comparative advantage in terms of costs. The body is asking for tax cuts, a deep tech fund and extension of the sunset clause provided to the sector. For the IT industry to thrive and be more competitive, the government should extend the corporate tax rate of 15% to new services companies in SEZ as well, according to NASSCOM.

However, its level of cost competitiveness is increasingly falling short in the current competitive landscape that includes countries like China which already have a huge cost advantage in manufacturing and are significantly investing in building competitiveness in services. Equally, smaller and comparable economies like Mexico, Vietnam, Philippines are equally or more cost competitive than India. Nonetheless, India's broad-based talent advantage and the ability of Indian companies to rapidly scale up continue to be India's unique competitive advantage. Despite its talent and scale-based advantages, smaller economies benefiting from their cost competitiveness, collectively, take away a large share of the business which can be part of India's GDP. This issue has become increasingly relevant in the context of high-end (high value) business offerings.

Therefore, in order to emerge as a leader in this landscape by leveraging its two distinct advantages - talent and scale, India will need to majorly boost its cost competitiveness. The key ingredients of the cost competitiveness are - land, capital, taxes. Therefore, this document is focused on taxation and the measures that may be undertaken to use tax policy to drive India's global competitiveness with a focus on technology sector. The suggestions made in this document are in line with this objective and are encapsulated under the six broad themes. These include Export Promotion, Incentivizing R&D, Incentivizing Talent and Skilling, Measures to Support Start-ups, Easing Taxation Regime for the Digital Economy and Promoting Ease of Doing Business (EODB).

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