Clarity in transfer pricing benefits IT sector: Polaris

The Indian IT sector would benefit from the clarity in transfer pricing in the 2014-15 budget, Polaris Financial Technology chairman Arun Jain said Thursday.

"The IT and IT-enabled Services (ITeS) sector will benefit from the clarity in transfer pricing, as union Finance Minister Arun Jaitley has agreed to make changes in its regulations," Jain said in a statement from Chennai.

In response to the recommendations made by the IT industry's representative body (Nasscom), Jaitley has proposed to introduce a 'roll back' provision in the advance pricing agreement (APA) scheme of 2012 so that such an agreement entered into for future transactions could be applied to international transactions undertaken in previous four years in specified circumstances.

He has also proposed to amend transfer pricing regulations to allow use of multiple year data instead of one year data for comparable analysis.

The finance minister said that necessary legislative amendments to give effect to the above proposals, including those relating to the authority for advance rulings and income-tax settlement commission will be moved in the current session of parliament.

As envisaged in the national policy on IT, the industry's revenues are projected to touch a whopping $300 billion by 2020 from $118 billion in 2013-14, with export of software services and products crossing $200 billion from $86 billion in last fiscal.

"The sector is also one of the biggest employment generators, with direct employment in the IT services and back office operations reaching 3.1 million in 2013-14," Jain said.

Polaris chief financial officer S. Swaminathan said stability in tax regime with emphasis on avoidance of retrospective taxation, providing clarity on transfer pricing and extending advance ruling mechanism augured well for the IT industry.

"The overall feeling of this budget exercise is positive, in view of the continuity on the financial/taxation management of the economy," Swaminathan said in the statement.