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PM sets up committee to review taxation of
IT sector
Monday July 30, 2012 02:47:10 PM,
IANS
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New Delhi: Prime
Minister Manmohan Singh Monday set up a committee to review
taxation of "development centres" and IT sector, with a view to
bring more clarity in the system that would help boost investment.
"The committee will engage in consultations with stakeholders and
related government departments to finalise the Safe Harbour
provisions announced in Budget 2010 sector-by-sector. It will also
suggest the approach to taxation of development centres,"
according to a statement issued by the Prime Minister's Office.
The four-member committee, headed by former chairman of the
Central Board of Direct Taxes N. Rangachary, has been asked to
submit its report to the government by Aug 31, 2012.
The activities like product development, analytical work and
software development carried out through captive entities in India
by the multi-national companies are popularly called "development
centres".
It is carried out in a wide range of fields, including IT
software, IT hardware, pharmaceutical research and development
(R&D), automobile R&D and other scientific R&D.
Some 750 multi-national companies have such centres at over 1,100
locations in India. The reason for this large concentration of
development centres in India is the worldwide recognition of India
as a place for cost competitive, high quality knowledge related
work.
The committee has been asked to engage in consultations with
stakeholders and related government departments to finalise the
approach to taxation of development centres and to suggest any
circulars that need to be issued.
The committee has also been mandated to examine issues related to
taxation of the IT sector and suggest any clarifications that may
be required.
The panel will engage in sector-wide consultations and finalise
the Safe Harbour provisions announced in Budget 2010
sector-by-sector. The committee will also suggest any necessary
circulars that may need to be issued.
Safe Harbour provisions were announced in Finance Bill 2010, but
have not been operationalised yet. The provisions have the
advantage of being a good risk mitigation measure and provide
certainty to the taxpayer.
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