Apex industry body ASSOCHAM has suggested the Union Government to link the India business process outsourcing promotion scheme (IBPS) with direct tax benefit.
“Government should allow assesses to claim depreciation on assets funded by subsidy under the IBPS,” highlighted an ASSOCHAM pre-budget recommendation submitted to the Centre.
One reason why the Government did not receive expected response for IBPS which was launched under the Digital India programme, observed the chamber, as the overall benefit under the IBPS scheme will be reduced by 33 percent as assesses cannot claim depreciation on assets funded by the Government subsidy.
The IBPS offers subsidy of up to 50 percent of capital expenditure or Rs. one lakh per seat, whichever is lower, for setting up BPO units in small towns and villages and to create employment there.
As Government has offered Capital Support: up to 50 percent of one time capital expenditure incurred, this expenditure will be reduced from the cost of capital assets which will, in turn, reduce depreciation amount as per ICDS VII. “This will increase the direct tax burden on such assesses.”
ASSOCHAM has also suggested for setting up a Venture Capital pool initiated and coordinated by a bank/SPV (special purpose vehicle)/PPP (public private partnership) mode to boost availability of capital funds to the electronics sector.
“A venture capital pool be created and allied tax incentive provided, funds of such pool shall be used by genuine private players through a stringent mechanism,” it observed.
It said that while contributors may be offered tax incentives on the dividend, manufactures may be provided with tax exemptions.
The chamber has recommended that weighted deduction of 150-200 per cent of actual cost for finance, energy and logistics cost be allowed on specified components.