The Prime Minister has constituted a committee to review the taxation of development centres and the Information Technology sector.
This will be headed by the former Chairman of IRDA and Central Board of Direct Taxes, Mr N. Rangachary.
The committee will engage in consultations with stakeholders and related government departments to finalise the Safe Harbour provisions announced in Budget 2010 sector-by-sector, a Prime Minister Office statement said.
The panel will finalise the approach to taxation of development centres and suggest any necessary clarifications by August 31.
It will also suggest any necessary clarifications that may be needed to remove ambiguity and improve clarity on taxation of the IT sector by August 31.
The Government has asked the committee to finalise Safe Harbour rules individually sector-by-sector in a staggered manner and submit the draft provisions for three sectors/sub-activities each month, beginning with the first set of suggestions by September 30. All the provisions can be finalised by December 31.
Taxation of development centres
The committee will engage in consultations with stakeholders and related government departments to finalise the approach to taxation of development centres and suggest any circulars that need to be issued.
It will also go for sector-wide consultations and finalise the Safe Harbour provisions. It will examine issues relating to taxation of the IT sector and suggest any clarifications that may be required.
GAAR guidelines
The new committee has been formed at a time when an expert committee under the chairmanship of Mr Partho Shome is engaged in a widespread consultation process to finalise the GAAR guidelines. This committee is expected to submit its report by September 30.
While this committee would address the concerns on GAAR provisions and would reassure investors about the predictability and fairness of tax regime, it was felt that there is still a need to address some other issues relating to the taxation of the IT sector such as the approach to taxation of development centres, tax treatment of “onsite services’’ of domestic software firms, and also the issue of finalising the Safe Harbour provisions announced in Budget 2010, the statement said.