Prime Minister constitutes committee to review taxation of development centres & IT sector

To review taxation of development centres and IT sector a committee has been established by the Prime Minister Dr Manmohan Singh. The Committee will function in consultations with stakeholders and related government departments to finalize the Safe Harbour provisions announced in Budget 2010. It will also recommend the approach to taxation of Development Centres.
Earlier, The Prime Minister had constituted an Expert Committee on General Anti Avoidance Rules (GAAR) under the Chairmanship of Dr. Partho Shome to engage in a extensive consultation process and finalize the GAAR Guidelines.

Who will be the head of the committee?

• Former CBDT Chairman N. Rangachary will be the head of the committee.

What would be the core objective of the committee?

• The Committee would look into concerns over GAAR provisions and would restore confidence of investors about the predictability and fairness of tax rule. A need was felt to address some other issues pertaining to the taxation of the IT Sector such as the approach to taxation of Development Centres. The committee will bring clarity on their taxation and fairness in tax system in accordance with best international practice which will bolster India’s software industry and endorse India as a right place for investment and for establishment of Development Centres.

What are Development Centres?

• Many Multi National Companies (MNCs) run activities such as product development, analytical work and software development through captive units in India.
• This is happening in areas such as IT software, IT hardware, Pharmaceutical R&D and other scientific R&D which are generally called as Development Centres.

As India provides cost competitive and high quality knowledge related work many MNCs have made the country a hub for their activities. Around 750 MNCs have such centres at over 1100 locations in India.

Month: Current Affairs - July, 2012