IT industry body Nasscom has advocated for a comprehensive review of foreign tax credit norms, while pitching for minimum alternative tax exemption and removal of "differential" tax rates for domestic and foreign start-up investors, as part of its budget wishlist.
Nasscom President R Chandrashekhar told PTI that the underlying principle for these recommendations is that domestic investors should not be taxed at a higher rate than foreign investors.
Moreover, the tax rate for digital transactions should not be higher than same or similar transactions being conducted offline, he added.
The IT industry has grown six-fold in revenue terms over a decade and continues to be the largest private sector employer in the organised sector.
The sector has grossed over USD 100 billion in exports, and employs nearly 3.9 million people directly.
Representatives of Nasscom, which is seeking support for the industry to maintain and enhance its global competitiveness, had met Finance Minister Arun Jaitley last month as part of pre-budget consultation.
Chandrashekhar said a comprehensive review of the foreign tax credit provisions will ensure efficiency and ease of compliance for exporters from India.
"We have made suggestion on use of foreign tax credit such as allowing an option for carry forward of credit for maximum utilisation.
"...and an option for consolidated filing wherein credit is calculated on clubbed foreign income and total taxes paid abroad, and not on a country-wise basis," he added.
On the long-term gains from sale of unlisted shares in start-ups, Chandrashekhar pointed out that the process attracts a tax of 20 per cent from domestic investors and 10 per cent from non-residents.
"There is an adverse differential between taxation of domestic and foreign investment in start-ups and the Small and Medium Enterprises (SMEs)...the point we made is that we should not have a situation where the domestic investor is disadvantaged viz-a-viz a foreign investor," he said.
Besides, Nasscom has sought MAT exemption for start-ups, saying this would strengthen the entrepreneurial ecosystem in the country.
"We are saying that any service performed in a digital mode should not end up attracting a higher tax than if it were done manually. If the Government's policy is digital economy, you cannot have a tax structure that works in the opposite direction," he said.
"We had urged the government to look into such specific instances and offer relief, and the GST Council has announced a reduction in GST rate from 18 per cent to 5 per cent recently for such services," he said.
He asserted that applying GST to such services, when delivered online, is against the ongoing efforts to promote digital adoption in the country.
He further said the industry is hopeful of continued support from the government in removing such anomalies.
The Budget Session of Parliament is set to commence on January 29 and the Union Budget for 2018-19 will be presented on February 1.