iSPIRIT sent a representation sent to the government with signatures of 121 Indian software companies such as Zoho and Freshworks
The institute has said that SOFTEX forms and TDS on domestic software product sales were hindering the industry’s growth
The institute wrote that reforms expected by the industry after the coming of the National Policy On Software Products haven’t come through
Indian Software Product Industry Roundtable (iSPIRT), a policy and research institute focused on ensuring India’s growth as a hub for new generation software products, has submitted a representation to IT Minister Ravi Shankar Prasad, urging the government to bring in reforms for India’s software product industry. The representation has the assent of 121 Indian software products and SaaS (software as a service) companies such as ZOHO, Freshworks, Tally, Kissflow, Quickheal, Busy, Intellect and Chargebee, among others.
In the representation, iSPIRT has talked about two specific regulations for software companies in India, which are believed to be creating hurdles in the ease of doing business. These regulations are the SOFTEX forms filing for international trade and TDS on domestic software product sales.
According to an iSPIRT press release, the SOFTEX forms, which are supposed to be filed by software exporters according to RBI norms, don’t serve a purpose with the Software Technology Park of India (STPI) scheme now lying defunct. The forms were introduced to measure the quantum of exports, but with the coming of the GSTN system, the export quantum of any product and service can be measured directly from the GSTN invoice of the exporter.
“SOFTEX form puts an unnecessary burden on software product companies for compliance and a substantial extra cost of compliance. STPI interference is unrequired for software product companies,” says iSPIRIT in its press release.
The institute added that the TDS levy on domestic software product sales was hindering the growth of the industry, causing “huge friction to the expansion of Digital India concept as it hinders trade of software products digitally. If a business wants to buy any physical product (e.g. mobile phone or laptop) online, you can swiftly do it without deducting any TDS. However, if a Business buys a software product online, a TDS of 10% under section 194J by the buyer is required.”
“The SaaS-based, software product industry can create another software boom for India and fulfil the 5 Trillion economy dream by 2025. SOFTEX and TDS are huge burdens and must have been removed long back,” said Suresh Sambandam, CEO of OrangeScape
iSPIRIT added that while the institute was expecting the government to swiftly bring in reforms after the ‘National Policy On Software Products’ came into force in February last year, the same hasn’t happened.
“Zoho’s mantra from day one has been ‘made in India, made for the world’. In SaaS Software business all transactions are digital. We can’t create globally competitive businesses with the level of compliance we have today in India. Minimum (digital) governance is truly needed,” said Jai Anand, CFO, ZOHO Corporation
Last year, the government approved the National Policy on Software Products 2019 with an outlay of INR 5,000 Cr fund, aimed at nurturing 10K startups in the software product industry and generate 3.5 Mn employment by 2025.
“National Policy on Software Products 2019 as approved by the Cabinet aims to encourage innovation, startups and creation of intellectual property (IP) by developing greater collaboration between government, industry, academia and other stakeholders,” Information Technology Minister of India, Ravi Shankar Prasad had said in a tweet.
Earlier this year, it was reported that the Ministry of Electronics and Information Technology (MeitY) was planning to deploy the INR 5,000 Cr corpus into at least 50 daughter funds that would comprise of SEBI-registered Category 1 and Category 2 Alternative Investment Funds, by the last quarter of the current financial year. These AIFs will then invest in startups in the software products sector.