Ernst & Young: Indian IT Sector Could Face Fairer Taxes

By Kalen Smith, Big4 Blogger

According to Dhinal Shah, tax partner at Ernst & Young, Indian IT companies could be placed under more lenient tax laws in the coming months. Shah’s report stated that the Prime Minister of India is setting up a new committee to tax the IT sector, as well as a number of other sectors.

Shah said that the IT sector has been taxed more harshly than other industries in recent years. These taxes have arguably made it more difficult for the country’s IT sector to expand. Additional taxation could discourage future growth even further. Therefore, the prime minister is asking a new committee to evaluate the tax laws and implement fairer policies for IT businesses.

One of the challenges with the existing tax code is the way the Indian government defines many taxes. Software payments are traditionally considered royalties.

Shah commended the actions of Prime Minister Manmohan Singh. He said that the prime minister sincerely wants to create a fairer tax system for the IT sector to help it expand in a time when the Indian economy faces threats of slowing down. However, Shah warned that IT experts will need to wait to see how the new committee fulfills its new role before drawing any conclusions as to how effective it will be.