IAMAI: Govt should give tax incentive to online, MVAS services

Internet and Mobile Association of India has said the government should offer emerging businesses like online advertising, online services, mobile value added services and internet cafe a moratorium from Service Tax for two years. According to IAMAI, these are emerging segments and cannot cope with the triple play of credit crisis, shrinking markets and high incidence of indirect taxes.

IAMAI has also suggested the government to give tax exemptions to venture funds operating in India so that they could continue to fund smaller companies. According to the association, since these companies do not have collaterals and so cannot get loans from banks, encouraging and incentivising the banks to increase the liquidity in the economy won’t address their credit crisis.

The association also feels that a reduction in Service Tax to 8 per cent across the board on all 104 categories of services covered under this tax for at least two years would be an appropriate measure to match the revival packages recently announced by the government for the manufacturing sector.

A cut in service tax will not only come as a major relief to the mainly micro, small and medium sized service sector companies, but will immediately boost domestic consumption up to the value of the rate cut or leave more money at the hands of the consumer, IAMAI has said. The association also believes that unlike the longer cycle time in manufacturing, a cut in the service tax will make an immediate impact.