Welcoming the government's move to notify safe harbour norms, IT-ITeS industry body Nasscom said on Wednesday that it will help in reducing litigation, besides attracting investment and expansion of delivery centres.
The government notification will help reduce litigation, offer certainty and would help attract new investment as well as expansion of existing centres, the industry body said in a statement.
It further said the move will reduce the burden of the tax department and the judiciary, where cases have been accumulating.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
Earlier in the day, the Finance Ministry notified the safe harbour norms to ensure certainty in taxation of overseas transactions between related entities and reduce the transfer pricing litigations.
Applicable to six sectors, including IT/ITES, auto ancillary and pharma, firms can take refuge under the norms for 5 years to avoid long drawn litigations with government.
"We believe that combination of Safe Harbour provisions and Advance Pricing Agreement (APA) will help resolve the tax and Transfer Pricing related concerns of global companies who have set up development centres in India. These centres contribute almost one third of the export revenue of the IT ITes sector," Nasscom said.
The safe harbour rules are applicable for five years which provides a reasonable time frame, it added.
"We are also pleased that an appeal mechanism has been introduced ensuring there is no unfair denial of Safe Harbour to eligible tax payers," it said.
The safe harbour norms are applicable to both small and large corporations without any cap on the transaction value.
"One of the key areas however is now to ensure that the provisions and the mechanism of the Safe Harbour are acceptable to corresponding tax authorities in the countries which receive these services," the industry body said.
India is a preferred destination for IT, BPM (business process management), engineering services and products, it added.
"We hope through a slew of announcements such as on SEZs, non-applicability of Profit Split, APA and now Safe Harbour provisions will send a strong message particularly to MNCs who were concerned about the uncertainty on taxation, large demand and ensuing litigation."
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
