Wednesday, July 8, 2009

Filled Under:

Excise gone, IT product firms to save 12% on taxes in India

IT product firms which have been reeling under the effects of double taxation — excise duty and service tax — now have to pay only service tax. The Union budget made this distinction on Monday, and with this software product firms can save 12 per cent of the excise duty.

Until now software product firms used to get taxed 12.36 per cent of service tax, 12 per cent of excise duty along with the customary VAT of 4 per cent. With the excise duty going away, the bane of double taxation has been addressed.

Infosys Technologies CEO S Gopalakrishnan told Financial Chronicle that the move to scrap the excise duty would help Infosys’ banking software product Finacle immensely. “It’s the kind of move that was required at this stage for the software product industry,” said Gopalakrishnan.

This will also help IT product firms such as Subex (which has fraud management solutions like Nikira and Moneta), and multinational product firms such as Microsoft, Adobe and Autodesk. Even accounting software such as Tally will come under this net.

But the move will benefit only those firms outside the special economic zones. Said Subex’s chairman and managing director, Subash Menon, “Subex is in a SEZ and we do not pay excise duty in any case,” he said.

Prior to this year’s budget, packaged software was being taxed twice in many instances, especially after the introduction of the service tax in the last budget. The finance bill last year had proposed withdrawal of exemption from service tax, being availed by the IT Sector under the Business Auxiliary Service, by amending Section 65 of the Finance Act 1994 and also specifically including information technology software service under service tax net. But the move has been unpopular ever since, and even Nasscom pushed for either dropping the excise duty or slashing the service tax.

Wipro Technologies CFO Suresh Senapathy said that it was just the kind of clarity that the IT industry needed on the issue. “There was always this confusion on several occasions whether both the taxes needed to be pressed for. It’s only fair that the excise duty has been removed. This will give a fillip to the software product industry,” he said.

0 comments:

Post a Comment

Blog Archive