IT services sector seeks much-needed relief
While the sector did heave a sigh of relief in January with the CBDT circular clarifying issues relating to the export of computer software and allowance under sections 10A, 10AA, 10B of the Income Tax Act, 1961, the sector seeks relief from the wrath of the transfer pricing authorities on account of high-pitched transfer pricing adjustments, wherein the recommendations of the Rangachary Committee could bring in the much-needed relief.
From an indirect tax perspective, the key issue dogging the sector is the service tax refund paid on input services used in export of IT services. While the last Budget did see a change in the methodology of ascertaining the eligibility of refund, with the removal of the requirement of nexus between input services and output services exported, the issue remains with the procedural complexity in terms of documentation and the gap in understanding between the policymakers and the implementation by ground-level authorities, due to which refund cheques to IT service exporters are not seeing the light of the day.
In such circumstances, the introduction of a drawback scheme shall provide an alternate to the existing options to the sector,
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