Budget 2013: Nasscom seeks clarity in transfer pricing norms

NEW DELHI: Software body Nasscom has asked the government to clarify transfer pricing norms and introduce more measures to promote research and entrepreneurship in the $ 100-billion Indian IT-BPO sector.

In its pre-budget recommendations, Nasscom has said that the Budget should be a policy declaration and it should not be just about taxes.

"Transfer pricing is an important issue and it needs to be resolved as India has to become a hub wherein we do development here and MNCs come and generate jobs. In that, transfer pricing is an issue," Nasscom President Som Mittal told PTI.

Transfer pricing is a mechanism used by large companies regarding transaction prices between separate entities of the same group. Multinationals are often accused of misusing the system to transfer profits to their subsidiaries in low tax countries.

The law requires that goods and services should be sold to subsidiaries by parent companies at arm's length price, the price at which goods are traded between unconnected companies.

Taxing these units has become a complex area for the revenue department, with the government often disagreeing on the profits declared by a foreign company for its Indian unit.

Last year, the government set up N Rangachary Committee to look into taxation matters of the IT sector and research and development activities.

On Budget expectations, Mittal said: "The Budget should be growth oriented. We need to create an environment so that there is an increase in investments and industries grow."

He suggested that the government should adopt an 'entrepreneurship mission' under which support and tax exemptions should be given to small companies to help ease business.

The government should support research and innovations as they are important to the industry, he said.

"The Budget should not be just about taxes, it is a policy declaration. Whatever recommendations we have submitted, there is no pressure on the exchequer. We are saying that through policy announcement, an environment of increased business confidence is created, so that more investments come in," Mittal said.