IT industry raises service tax, TDS issues with Shome panel

Amidst its tax woes, the IT industry raised issue of service tax refunds and interpretation on tax deducted at source (TDS) on softwares with Finance Ministry's high-level committee.

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The committee, headed by the adviser to Finance Minister Parthasarthy Shome, was set up by the government last month to address tax-related issues that affect the industry.

"We had the first meeting among industry bodies with the Shome committee yesterday. This format is a very productive way of dealing with the industry issues in a collaborative manner," IT-ITeS industry body Nasscom President Som Mittal told PTI.

The industry has other issues also and Nasscom will seek another date from the committee after it has met with other industry sectors, he added.

On the issues raised by the industry, Mittal said: "We discussed about service tax refunds and what can be done there. We talked about interpretation issues on TDS on software products as there is a major problem on cascading of the TDS for small companies.

"Also issues on how the safe harbour provisions will come in, implementation of Rangachary committee recommendations, etc."

During the discussion, some of the issues were brought to the knowledge of the government on which it said will get back. On others the industry was asked to come back with further clarifications, he added.

"It was a very structured meeting, and we were asked to put our issues before the meeting and they had studied the issue. We met for an hour and 45 minutes. We had members from IT industry and Shome had people from direct and indirect taxes," he said.

Officers of the Tax Policy and Legislation (TPL) wing of the Central Board of Direct Taxes (CBDT) and the Tax Research Unit (TRU) of the Central Board of Excise and Customs ( CBEC) were also present at the meeting.

IT-ITeS sector has been demanding more clarity on tax on software treated as royalty, removal of the minimal contiguous land requirement for SEZs, dual levy of VAT and service tax on domestic software sales, and implementation of the Rangachary committee, among other issues.