"Taxing e-commerce at this stage will lead to India losing out its competitive advantage in the global market since a similar tax is not levied in other countries," a senior official of a Delhi-based IT services company said. National Association of Software and Service Companies (Nasscom), India's IT industry think tank, in its budget recommendations to the finance minister, said the government should refrain from imposing unnecessary regulations or taxes and tariffs on e-commerce at least for the next five years. "As it is, the net commerce cuts transaction cost, so we are not demanding any concessions, but we have demanded that tax systems should treat transactions equally irrespective of whether they are conducted through conventional or electronic means," Dewang Mehta, president of Nasscom, said in a statement. Economists, on the other hand, feel that confronting with a need to find new revenue sources, Mr Sinha will be forced to extend the service tax net to e-commerce transactions in spite of stiffresistance form the Information Technology Minister Pramod Mahajan and the software industry itself. Nasscom has also demanded that the government should issue a clarification that onsite services would continue to get income tax exemption under the section 10A/10B of the Income Tax Act.

"The industry would like the minister to make some changes in section 10A/10B, which provides for income tax holiday to units registered with special export oriented zones, to facilitate mergers and acquisitions," Mr Mukherjee said. Changes in the section would allow IT companies to avail income tax exemption even after changes in the company's shareholding pattern, he added. Currently, as per the provisions of section 10A/10B, if more than 51 per cent shareholding of a company, registered with special export zones, changes hand, then the company will cease to get income tax exemption from that year.

India's software exports touched $4.0 billion in revenue terms in the fiscal year 1999-2000. Nasscom predicts that India's software exports will swell to $6.2 billion in the year to March, and to $9.4 billion next year. Amul Gogna, executive director of Investment Information and Credit Rating Agency (ICRA) feels that the budget should lay a clear roadmap for up-grading infrastructure in the IT sector. "Considerable portion of companies in the Indian IT market do not have access to large marketing infrastructure. The government must create a special fund for investing in research and development and creation of network infrastructure," Mr Gogna said. Vinnie Mehta, director of Manufacturers Association for Information Technology (MAIT), said the forthcoming budget would be crucial for the Indian IT hardware industry that would face zero duty regime by 2003, as per the guidelines of the Information Technology Agreement of World Trade Organisation (WTO).

India Abroad News Service