India’s main software industry lobby, the National Association of Software and Service Companies (Nasscom), is asking the Centre to either defer a proposed minimum tax payable by the companies on their profits or extend a tax holiday beyond 2009. Nasscom represents close to 1,100 tech and back-office service firms.
In its post-Budget recommendations submitted to finance minister P. Chidambaram, Nasscom said levying the 11.3% minimum alternate tax (MAT) will upset the business competitiveness and viability, and make small and medium enterprises (SMEs) uncompetitive in the global market.
The body has also recommended that a 30% fringe benefit tax (FBT) payable by companies on stock options given to employees as a retention tool, should instead be levied on employees as is the international practice, and that too only on those options granted on or after 1 March 2007. Nasscom has proposed that the tax should be levied at a maximum rate of 10%.
These are “strong arguments on why stock options should not be taxed,” said Sangeeta Gupta, vice-president at Nasscom. “We believe we have a strong case,” she said.
The trade body is lobbying with the ministry of information technology on the tax and other issues too, she added.
Surprised by FBT on employee stock options, tech-service vendors, including Infosys Technologies, Wipro Infotech and Satyam Computer Services, are asking their employees to exercise their options before 31 March, the last date of fiscal 2007.
Nasscom further suggested that if MAT was not deferred, the government should at least extend a tax concession on exports beyond March 2009.