This has diluted the benefits offered under SEZ Scheme. Many of the expansion plans are put on hold.

Finance & Commerce Ministry should consider abolishment of MAT levy on SEZ Developers & Units.

Taxation of Software Payments: Taxability of purchase and licensing of software continues to be a plaguing issue for IT Industry.

Characterization of payments received for use or right to use software products has been a contentious issue. While there have been several rulings which have appreciated the distinction between use of a ‘copyright' and a ‘copyrighted article' in the case of shrink-wrapped software, the recent (Samsung etc.) rulings do not seem to accept this distinction.

An amendment may be made to provide that license payments made for use of software for the payer's own operations (as against duplication for onward sale/license) being payments for use of a copy-righted article are outside the ambit of the definition of “royalty” as provided in Sec-9(i)(vi).

It's high time that CBDT/Finance Act should come up with a clarification/amendment so as to address the confusion & litigation which is prevailing on the taxability of software payments from a long time.

Finance Ministry/CBDT should expedite to constitute the panel and come up with the Draft Rules.

Finance Ministry/CBDT should put in place safe harbor rules for the APA to function well. Under Safe harbor provisions department can come up clearly with benchmarks on different transactions that should be operationalized. Individual companies can then apply for pricing agreements based on these provisions.

This will help the companies in resolving the uncertainty on a prospective basis and avoid penalty & litigation costs.

Finance Ministry/CBEC should expedite on the liberalized process for refund of service tax and it should be implemented in actual letter and spirit by the field formations. Rejection of refund claims on frivolous grounds should be stopped.

IT Industry in India is facing a huge pressure on their margins as fears of a recession in the US and debt crisis in Europe is impacting the export markets. This settlement of pending refund claims will help shore up the dwindling bottom lines.

With the proposal to shift taxation (Service Tax) on the basis of negative list of services, the issues surrounding the dual levy are going to manifold.

Finance Ministry should come up with clear guidelines on the characterization/taxation of software payments.