Indian software product companies seek urgent reforms to enhance ease of doing business

Indian software product companies led by iSPIRT have highlighted the issue of compliance and taxation which is hindering their growth.

Indian software product companies has raised the issue of ease of doing business in the country, especially in the area of compliance and tax deducted at source.

In a representation to the Ministry of Electronics and Information Technology (MeiTY), 121 Indian software product companies led by iSPIRT, an Indian think tank, sought urgent reforms to ensure faster growth of these firms.

Among the signatories to the letter include companies like Zoho, Freshworks, Tally Solutions, Quickheal, Capillary Technologies etc.

The two key issues raised by iSPIRT are: SOFTEX forms filing for international trade and tax deducted at source (TDS) on domestic software product sales.

The letter highlighted the need for urgency in reforms as it stated, “The Indian Software product industry is all poised to contribute to building software products for AatmaNirbhar Bharat that shall not only make India Self-reliant in software but also contribute to exports.”

On the issue of SOFTEX forms, the letter put forth the point this regulation was brought in place to regulate remittances received on foreign exchange on exports, especially in early times of Indian Software industry with advent of Software Technology Park Scheme.

The letter stated adherence to these regulations could be done through the GSTN system and there is duplication of efforts by the Indian software product companies.

“SOFTEX form puts a very unnecessary burden on Indian software product companies for compliance due to its duplication and an extra cost in terms of both internal administration and fees,” the letter said.

Jaianand, CFO, ZOHO Corporation, said, “We can’t create globally competitive businesses with the level of compliance we have today in India. Minimum (digital) governance is truly needed.”

Similarly on the TDS on software, iSPIRT letter said this provision was brought in the 2012 budget mainly to check the loss of tax income software was procured from foreign entities. However, this was also imposed on purchases of software from domestic Companies.

“The provision is a heavy burden specially for small and mid-size software product companies as in order to effectively deal with these provisions the software product companies are now forced to float one more entity to avoid burdening their trading channels from TDS by end buyers,” the letter stated.

The government has unveiled the National Policy on Software Products (NPSP) and the expectations were riding high there would be reforms which would contribute towards faster growth of Indian software product companies.

“The quickest help under NPSP that can come from MeitY is to remove hurdles around ease of doing business provisions for the Indian software product industry,” said, Nakul Saxena, Director-Policy, iSPIRT.
Edited by Saheli Sen Gupta