 "Assocham")
The Associated Chambers of Commerce and Industry of India (Assocham) has sought a series of direct tax measures aimed at boosting investor confidence, particularly in digital infrastructure, and called for simplifying compliance and reducing litigation, in its pre-Budget submission to the revenue secretary.
A key demand relates to tax certainty for global data centre players looking to invest in India.
The chamber said the government should ensure that foreign entities availing data centre services from India are not treated as having a business connection, significant economic presence (SEP) or permanent establishment in the country.
“Setting up an approved data centre requires significant long-term investment. Given the size and scale, availability of land/necessary resources, there is a huge opportunity for India to attract investments from large digital players to set up data centres in India through their subsidiaries/affiliates,” it said, warning that lack of clarity could deter multinational investment.
It added that Indian subsidiaries providing such services should get a safe harbour regime with prescribed margins, given the long gestation period for data centre projects.
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Safe harbour should be effective from the date of operationalisation and applicable for at least 15 years, the chamber argued. It added that costs related to foreign affiliates’ technology or data stored in India should be excluded while computing margins.
On easing business rules for digital firms, Assocham sought removal of non-digital transactions such as import of goods from the scope of SEP.
It said the provision currently could force Indian businesses to deduct tax even where the non-resident has no physical or digital presence in India.
It urged the government to issue attribution guidelines and exempt taxpayers eligible for treaty benefits from SEP reporting.
Assocham stated that “consequently, any Indian resident who makes payments to non-residents who have SEP in India may be obligated to withhold tax prior to making payment, to such non-residents” which creates uncertainty.
To support domestic reorganisation, the chamber said fast-track mergers and demergers under the Companies Act be granted tax neutrality.
It added that a blanket denial compels companies to avail the National Company Law Tribunal (NCLT) route only and the fast-track route will be futile.
It also pushed for expanding tax-neutral treatment to all forms of entity conversions and for allowing loss carry-forward under such restructurings.
These should be simplified and expanded so as to enable businesses and investors to optimise their operations and holdings without facing tax costs, it said.
On manufacturing, Assocham urged the government to revive the 15 per cent concessional corporate tax regime for new units to sustain investments.
This will enable India to remain attractive for making fresh capital investment, provide a boost to the domestic economy and also encourage exports, it argued.
Addressing stressed-asset resolutions, the chamber sought exemption for loan waivers granted under the Insolvency and Bankruptcy Code (IBC), stressing that taxing waived debt “goes contrary to the purpose behind the IBC.”
It also requested clarity on depreciation for assets partly used for business.
Assocham asked that write-off of receivables be excluded from TDS under Section 194R, stating that requiring tax deduction on irrecoverable amounts is “doubly onerous” for creditors.
For small entrepreneurs and the agriculture ecosystem, Assocham argued that farmers and farmer-producer organisations should be exempt from TDS on e-commerce transactions.
It said the current rule imposes an undue burden on farmers, especially where platforms do not handle billing or collection.
The chamber also sought alignment of tax treatment of government subsidies with actual cash receipt to ease liquidity pressure on companies, observing that “actual receipt generally takes two to three years.”
To spur hiring, it proposed raising the salary threshold for claiming deduction on new employees to ₹50,000 per month and extending the incentive to contractual workers, saying employment generation is a key issue for the country and the limits fixed in 2016 are outdated.
On transfer pricing, Assocham urged restoration of the earlier definition of associated enterprises, warning that the current language could trigger disputes merely on account of participation in management or capital.
Finally, the chamber made a strong pitch for speeding up dispute adjudication and widening safe harbours. Advance rulings should be delivered within defined timelines, it said, while seeking broader coverage for safe harbours and raising the limit for the dispute resolution committee from ₹10 lakh to ₹50 lakh to encourage more small taxpayers to opt for it.
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