New Service Tax rule to increase IT Cash Flow in India

According to a recent report, cash flow for Indian IT companies will rise. It is observed that the Indian Government’s newest notification that allows SEZs and units operating in them to not pay service tax. This way, IT companies need not pay tax and then claim refunds, which will significantly improve their cash flow.

 

Som Mittal, President, NASSCOM, said, "It used to be a huge bother for the IT companies. Now, not only will IT SEZs benefit, it will also mean less work for those in the tax department who have to process these requests."

 

It is worth noticing here that, presently, nearly Rs.4,000 crore of service tax refund claims are pending with the government, of which about 30% are from SEZs.

 

Som Mittal further added that the upfront service tax exemptions would enable at least 80% of services used by SEZs to be exempt from imposition of service tax. These would include services like leased line, telecom, manpower supply, software licensing, and renting and maintenance. He hoped that the new notification would also speed up refunds of payments made in the past.