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One of the key initiatives the Domestic Council has focused on is the Model RFP and advocacy on changing the terms and conditions that would enable the industry to participate in government projects. Based on the efforts led by NASSCOM, MeITY has released the Model RFP template on its website. This can be accessed here

 

This version is a huge step forward and addresses many of the 19 pain points outlined by NASSCOM. There are 1-2 critical issues that are still unresolved and we are requesting MeITY to address those, but they are not immediate show stoppers. Some of the issues raised are outside the purview of MeITY and hence cannot be addressed by the model RFP.

 

Key Highlights of the Model RFP

 

  1. Gap Warranty: This issue is partially resolved. In case of no response from the purchaser in a post go-live scenario, the deemed acceptance clause will be invoked.

However there are no clear timelines defined. NASSCOM is representing to MeiTY to define a timeline to ensure signoffs over a maximum period of 45 days.

 

  1. Cash Flow: 75% payment on delivery, 15% on commissioning and 10% four months after go-live is the new introduction. Most of the Domestic Council members feel this is very positive.

 

  1. Deemed Acceptance: This is a big win as the government has allowed Deemed Acceptance if there is no response in 15 days from final submission.  

 

  1. Flexibility in H/W specs: Change in OEM has been permitted after approval from the Purchaser.

 

  1. Penalty (fixing of any other defects): Maximum damages capped to one TCV as desired.

 

  1. Penalty (from any other projects): As desired, penalty to be recovered from payments of same project.

 

  1. Termination for Convenience: Although the overarching Optional clause has been removed however no mention of AMC, WIP, uncovered investments has been made as requested.

 

  1. Confidentiality: Organisational NDAs can be accepted depending on project criticality.

 

  1. Extension of warranty (SLA Credits) :  Not completely removed but it’s been mentioned here with a caveat- “For reasons not attributable to IA, the IA shall not be liable”. NASSCOM is representing to MeitY for further clarification on sharing of extended warranty costs.    

 

Know more about NASSCOM's initiatives and programs, follow NASSCOM impact stories

MEITY has released the report on the data protection framework along with the draft law on 27.07.18.  We are analysing these. The report has dissent notes from Ms. Rama Vedashree, DSCI and (pg. 207) and Prof. Rishikesha T Krishnan (pg. 213). Our quick take along with a summary of the Bill pointing to the proposed restrictions around cross border data flow are enclosed (see below). We will be working closely with industry and government in shaping the policy as the government and regulators develop, realign or sharpen their stand on the topic. 

 

1. NASSCOM-DSCI view

 The Personal Data Protection Bill released by the Justice Srikrishna committee has suggested a much needed framework for data protection and privacy in the country. The Bill builds on the Supreme Court Judgement that advocated privacy as a fundamental right for the country and creates a framework for all stakeholders to be more responsible and build trust while dealing with personal data. NASSCOM-DSCI welcome the thrust on creating an institutional structure through a Data Protection Authority in the country as well as the importance of Privacy by Design.

 

NASSCOM-DSCI has been advocating for a healthy balance between privacy and Innovation, given that India is today emerging as a preferred hub for innovation and STEM talent globally. Policies that govern data protection, storage and classification need to be carefully crafted given the global footprint of the IT-BPM sector. Service providers in India process financial, healthcare and other data of citizens globally. India is also the destination for R&D, Product Development and Analytics, Shared Services.

 

Mandating localization of all personal data as proposed in the bill is likely to become a trade barrier in the key markets. Startups from India that are going global may not be able to leverage global cloud platforms and will face similar barriers as they expand in new markets.

 

A detailed analysis of the bill is being undertaken and NASSCOM-DSCI welcome the reassurance of an extensive consultation process before the Bill is enacted into law.

 

2. Quick reference to treatment on data localisation. See attached summary for details.

 

  • Personal data: A copy of all personal data is required to be stored in India. There are restrictions on transferring personal data outside India.
  • Sensitive personal data: Passwords, financial data and official identifier are being treated as sensitive personal data. Sensitive personal data has to be only stored in India barring some exceptions. It can only be transferred out of India for provision of health services or emergency services where such transfer is strictly necessary, or to a particular country, a prescribed sector within a country or to a particular international organisation where the Central Government is satisfied that such transfer or class of transfers is necessary and does not hamper the effective enforcement of this Act.
  • Critical personal data: The Government has the power to notify critical personal data which would be required to be processed only in a server in India. This suggests that such data needs to be stored as well as processed only in India.
  • Criminal Offence: Offences under the Act, including those related to personal data, are treated as criminal offences.
  • Anonymised data: The Bill does not apply to processing of anonymised data.
  • Date of restrictions on data flow coming into force: The Bill leaves it to the Government to decide when to notify the restriction on cross border flow of data including requirement to store a copy of personal data in India.

The much awaited Notification on Place of Effective Management (POEM) guidelines is released and attached herewith for your reference. You would recall that the draft notification was issued  in June last year and we had been requesting for the release of final notification considering the rules become effective from FY 16-17. The notification is deemed to have come into force retrospectively from April 1, 2017.  

 

While we had raised several ambiguities some have been partially addressed and for the rest we will continue to engage with the Government basis the feedback received from industry.

 

Also attached is a summary of key relevant provision along with a comparison of draft and final notification and issues addressed basis NASSCOM recommendations.

The Ministry of Commerce, Government of India has formed a Think Tank on the Framework for National Policy on E-commerce. The key objective of the framework is to provide a credible forum for an inclusive and fact-based dialogue leading to informed policy making, so that the country is adequately prepared to take advantage of the opportunities, and meet the challenges, that would arise from the next wave of advancements in the digital economy.

 

The agenda of the framework was divided into several sub groups and NASSCOM was invited to share and represent on 3 such. NASSCOM in consultation with industry members represented on the forum with key suggestions on each of the sub groups. We will continue to engage with the Government towards a holistic and enabling National E-commerce policy.

 

Know more about NASSCOM's initiatives and programs, follow NASSCOM impact stories

The paper provides a comprehensive perspective on what can be the different dimensions for AI from an India perspective. The emphasis on the role of the government in catalyzing this shift and creating the institutional framework and building blocks will set a strong foundation for industry, startups and citizens.

 

AI and its potential for the technology industry is a significant priority area for NASSCOM and efforts are underway at NASSCOM in a number of segments. NASSCOM’s submission include the following dimensions.

 

  • Positioning: India’s National Strategy #AIforAll should focus on economic development and call out the key success metrics. This is critical for AI to permeate across all sectors in the country and support key parameters of economic and sustainability index.
  • Global Ambition: AI for India is well articulated as the strategy. However, it is equally important that we take an aggressive approach of AI for the world. Catalyzing Indian startups, large enterprise and government enabled AI solutions which create impact for India and have the potential to disrupt the world is critical. The vision of building an AI Giant from India must be part of our global ambition.
  • Key Enablers: The strategy articulates key sectors wherein AI adoption can stimulate growth and promote inclusion. Equal, if not higher focus is needed on talent development, access to data and building a regulatory framework that catalyse innovation. These are must-do imperatives for success.
  • Collaboration: The strategy document lays a great deal of emphasis of R&D in academic institutions to catalyse the R&D ecosystem in AI. It is important that collaboration is a key design principle for the National AI Strategy, and the framework includes the efforts happening in Industry to create ecosystem capabilities and solutions.
  • Design Principles: The National AI Strategy will continue to evolve and hence it is important that the key design principles of the AI Strategy are articulated. Augmenting and not replacing is a key principle that needs to be stated upfront.
  • Evangelisation and Advocacy: AI adoption and scale will require large scale evangelization and advocacy to create trust, remove misconceptions and showcase what AI means to citizens in terms of outcomes and benefits.
  • Institutional Structure: The government could consider setting up a cabinet level position to look into AI development & proliferation (like Chief of Cyber Security) supported by a centralized institution that will work with Industry, Ministries and States, Research & Academia on implementation
  • Milestones and Implementation framework: The National AI Strategy will be implemented by multiple departments, states, industries and startups. It is important that an implementation framework is defined with clear milestones.

 

 Know more about NASSCOM's initiatives and programs, follow NASSCOM impact stories

The draft of National Telecom Policy (NTP) 2018 also called as the National Digital Communications Policy 2018, was issued for public comments by the Department of Telecommunications. NASSCOM conducted a consultation with its members and invited inputs from all across. Basis the feedback received, a response was submitted to on the draft. Some of the key points of submission are as follows:

 

  • Need for a consolidated approach to ensure that India’s digital economy not only reaches but also exceeds the estimated value of one trillion USD by 2025.
  • Ensure adequate co-ordination among different regulatory agencies and stakeholders including industry to ensure cohesive action.
  • Unbundle different layers of communication services and introduce a differential licensing regime.
  • Need to review OSP regulations in consultations with industry.
  • Track new technologies and even consider a regulatory sandbox approach to assess whether regulation is indeed required or not and until such time deploy a policy of regulatory forbearance.
  • For establishing India as a global hub for cloud computing, content hosting etc. there is a need to a focus on creating adequate infrastructure.

 

NASSCOM would be working with the DoT on an ongoing basis for an effective policy regime. 

 

Know more about NASSCOM's initiatives and programs, follow NASSCOM impact stories

 In pursuance to the 2018 amendment in Section 28 of the Customs Act, 1962 (“Customs Act”) regarding pre-notice consultation, the CIBC had recently issued Notification No. 29/2018-customs (NT) dated April 2, 2018 which notifies the Pre-notice Consultation Regulations, 2018.  These Regulations prescribe the procedure for conducting the pre-notice consultations.  

 

  • To recap, Section 28 of the Customs Act prescribes the normal period of limitation for issuance of a show cause notice.  As per these Regulations, an officer who proposes to issue such notice is required to inform such person, from whom the amount is proposed to be recovered, in writing, at least two months before the expiry of the time limit mentioned in Section 28 of the Act.  It also provides that this intimation is required to be made before issuance of a demand notice. 

 

  • Further, where the concerned person intends to be heard in person, such intent would need to be clearly indicated in the reply filed.  However, an important aspect to note is that the Regulations provide that no adjournment can be sought once the PH request has been granted. 

 

The Regulations are largely a welcome move since it provides assessees an opportunity of being heard before issuance of a notice.  The Regulations also contain other details regarding time limit for filing the response and time limit for granting of the PH and the attached document may be referred to for these details. 

After months of discussions with the CBEC-Service tax team, the circular clarifying the place of provision for software exports is out.

 

You would recall in Nov, that several service tax refunds were rejected in Mumbai, in the pretext that data, emails etc were received in India. AS NASSCOM we had representd the matter to the CBEC and Revenue and were given an assurance that the matter is being looked into. A press release reassuring that no hasty decisions will be taken was also released by the MoF.

 

We are extremely delighted to share that, after several interactions, where the NASSOCM team with or without Industry members, outlined typical fact patters of the contracting and development activities undertaken by the Industry, the CBEC has finally issued the circular, where they clarify that place of provision of services would be the recipient of services, thereby according export status. We hope that this clarification will put to rest the ongoing disputes and denials that companies have faced.

 

We welcome your feedback.

 

We are glad that our quiet but steadfast focus on the issue has yielded results. We continue to work for our members to ease the business environment.

As part of the Domestic Council’s Charter to enhance engagement with the CIO Community – the prime drivers of IT adoption in any organisation, the 2nd NASSCOM CIO Connect event was held in Ahmedabad on 6th April 2018 where CIOs from Chemical, Pharma and Banking industry provided key insights and thought leadership on the way ahead for IT in their respective segments.


The key takeaways from the discussion included:
 Urgent need for a robust IT Partner Ecosystem
 Transformation from custom build to Global solutions
 Challenges in Talent Acquisition/retention and Product hunting
 Growing disconnect between IT industry and solutions being offered- Ensuring plugins with industry specific solutions
 Ensuring continuity of technology and enmeshing of existing technologies in an operational business
 Developing an industry-side fact list, and a need for an executive summary showcasing the best in class technology
 Challenges around going Digital
 Complicated & Challenges complying with different regulators
 Identifying best practices in Fraud Risk Management & formulation of Asset Management Guidelines


The event was very well received by the western region council members that were also present during the meeting. This was a great opportunity for our members to understand the User Community issues and accordingly develop strategies to avail the given opportunities.


Domestic council will strategize on the suggestions/recommendations made by CIOs and ensure concrete steps are taken to address the concerns.

 

 

The income tax department has noted the concern related to angel tax being levied on startups, basis represnetations made by various stakeholders.

 

In the recent letter addressed to principal commissioners, the CBDT has advised: 

  1. No coercive action be initiated for recovery of outstanding demands
  2. Expeditious disposal of appeals by commissioner appeals

 

While fair market value evaluation continues to be applicable on startups, the above advise would be helpful to offer temporary relief to considerable anxiety over demand recovery process. Further, decisions on appeals pending will also act as guidance for on field assessments.

 

However the issue of levy of angel tax needs to be looked into to offer a long term solution.  

 

The copy of the letter can be accessed at https://www.incometaxindia.gov.in/Lists/Latest%20News/Attachments/218/Determination-fiar-market-value-unquoted-equity-shares-Start-Up-6-2-2018.pdf

 

The Union Budget 2018 was presented today reiterating the Government’s commitment to leverage technology and digitalization as a key for India’s development strategy across sectors. The focus on “ease of living”, will inevitably spur deployment of technology across all verticals.


Medium, Small and Micro Enterprises (MSMEs) are instrumental in providing employment to people. Proposals for reduction of income tax to 25% for companies with annual turnover upto INR 250 crore will be helpful and is in line with NASSCOM’s ask in rationalising the corporate tax rates. However there is a marginal increase in tax rate for all other companies arising out of increased Cess.


In the context of the growing Digital economy, the budget proposals include additional criteria for taxation that would be applicable to companies who may not have physical presence in India. This could be particularly relevant to the technology sector, as internet driven businesses and cloud based platforms blur geographical boundaries.


NASSCOM welcomes the announcement of a national program to direct efforts in the area of artificial intelligence, including research and development and comprehensive initiative on Cyber-physical systems. This will enable India to leapfrog in areas of emerging technologies globally.


The proposal to review the outward direct investment will be of great relevance to the IT sector as it charts its global growth trajectory.


Focus on digital payments is as per expectations. Use of block chain technology to encourage digital payments will ensure new security technologies.


The Technology sector will also see many emerging opportunities arising out of Government reliance on Technology driven development e.g. web-based Government Integrated Financial Management Information System, E-courts, E-assessments etc. It is for the Startups and Industry to exploit such opportunities and contribute to national objectives.


Some of the key announcements and their impact are summarised below:


1. There is continued reliance on technology for Governance and development. This is in line with the digital India vision, and offers opportunities for the technology sector and Startups.

 

  • Allocation of digital India doubled to INR 3073 crore.
  • Disposal of its business by introduction of e-office and other e-governance initiatives in Central Ministries and Departments.
  •  A web-based Government Integrated Financial Management Information System (GIFMIS), administered by Controller General of Accounts, for budgeting, accounting, expenditure and cash management for more effective fiscal management of Government.
  • Project ‘e-Vidhan’ to digitize and make the functioning of all State Legislatures paperless.
  • E-Courts, to bring about universal computerization of all Districts and Subordinate Courts, use of cloud computing and availability of e-services like e-filing and e-payments as well.


2. Certain focussed initiatives announced, that underscore the transformative impact of technology in India, and also highlights the need for technology solution for wide ranging issues.

 

  • Increasing use of technology for safety under railways ‘‘Fog Safe’’ and ‘‘Train Protection and Warning System’’
  • Transforming education sector – by increasing use of digital intensity in education – black board to digital-board - upgrade the skills of teachers

 

3. Technology - References were made to cutting edge technology areas like 5G, AI, Robotics, Quantum computing and the Government reiterated its support for Research and Development. While specific were missing, it would be important for NASSCOM and its members to work closely with the Government to shape the digital ecosystem.

 

  • To invest in research, training and skilling in robotics, artificial intelligence, digital manufacturing, big data analysis, quantum communication and internet of things. 
  • Department of Science & Technology will launch a Mission on Cyber Physical Systems to support establishment of centres of excellence.
  • Niti Aayog to establish a national programme to direct efforts towards Artificial Intelligence, including research and development of its applications 
  • Department of Telecom will support establishment of an indigenous 5G Test Bed at IIT, Chennai.


4. Digital Payments


The Government’s on-going focus on Digital Payments was evident, as the FM clarified the legal invalidity of cryptocurrency and commitment of the Govt. to eliminate them. Further, the Govt. confirmed that there is a group working in the Ministry of Finance on policy measures and institutional mechanism for facilitating digital payments, encourage block chain technology and creating the right environment for Fintech companies.


5. Globalization
PM in his Davos speech had referred to the “worrisome situation against globalization” – As India continues to grow, and the IT sector charts its global trajectory, policy instruments to support the journey would be essential. In this context, the proposal to review existing guidelines and processes and bring out a coherent and integrated Outward Direct Investment (ODI) policy will be important for the IT sector, as the Industry undertakes M&A, and sets up Development centers etc.


However, a key ask of the IT sector was a review of the foreign tax credit policy in India. We hope that this will also be looked into during the year.


6. Taxing Digital Economy
The budget has expanded the concept of business connection in domestic law. For a long time, nexus based on physical presence was used as a proxy to identify business connection with a country. However, in the digital economy where business models are operating remotely through the existing nexus rule is seen to be inadequate. Therefore the budget proposes that a non-resident enterprise would create a taxable presence in a country if it has sustained interaction with the economy by the aid of technology and other automated tools. Revenue factor may be used in combination to determine 'significance economic presence.


This rule could have significant impact in this era of cloud and internet enabled businesses. The chances of a foreign company constituting a BC/PE in India under the new rules proposed now, maybe higher given the extent of digitization.


7. Start-up

 

  • Startup India scheme extended to Startups that will be set up till March 2021, and definition harmonised with DIPP definition Startups, - definition of ‘eligible business’ for a start-up is proposed to be aligned with the modified definition notified by DIPP. It is further proposed to extend the incorporation date for a start-up for availing benefit under section 80-IAC of the Act to 31st March, 2021 from 31st March, 2019 and rationalise the condition of turnover for availing the benefit.
  • For startups, aligning the definition of start-ups with the definition of DIPP and extending the availability of start-up scheme till March 2021 is a welcome move however there is a need to relook at the requirement of Inter-Ministerial Board (IMB) certification that is required for start-ups to qualify for the tax holiday so that the benefit can be availed by many start-ups.
  • We will continue to engage with the Government to make these announcements effective and also on other unaddressed recommendations related to harnessing domestic and angel investors to strengthen the start-up ecosystem.
  • The FM acknowledged the need to create a favourable environment for investors. We look forward to the development of a separate policy for the hybrid instruments for attracting foreign investments. This will have a bearing on the startup ecosystem.


8. Incentives for Job creation
Incentivising employment and job creation – Employment generation was one of the key objectives and suitable measures are announced to meet the same. In line with public pronouncements pertaining to women's empowerment, Budget 2018 made notable announcements for encouraging women employment.

 

  • To increase in hand salary of women, EPF contribution of women employee’s brought down to 8% for first 3 years.
  • For new jobs - 12% of the wages of the new employees in the EPF for all the sectors for next three years.
  • Facility of fixed term employment will be extended to all sectors - encourages alternate employment models like contracts.


9. Ease of doing business – notable steps in making business process simpler with the use of technology.

 

  • Amendment in Income tax Act to introduce on assessment to be done in electronic mode to reduce physical interactions.
  • A scheme to assign a Unique ID (AADHAAR) for companies – should to lead single registration across Govt etc.
  • A Central Public Procurement Portal to provide a single point access for all information on procurement. Around 3.5 lakh contractors and vendors are already registered on this platform. In November, 2017 alone, electronic bids for over one lakh tenders valued at around two lakh forty thousand crore were invited through this Portal.
  • Business reforms for ease of doing business deeper and in every State of India, the Government of India has identified 372 specific business reform actions.

 

10. Make in India

 

  • Defence Production Policy 2018 to be introduced to promote domestic production by public sector, private sector and MSMEs.
  • Increase in customs duty on Mobile phones from 15% to 20% should support and encourage domestic manufacturing.


11. Other announcements

 

  • Income Computation and Disclosure Standards - The ICDS, prescribes methods for recognizing revenue, accruing certain expenses, losses, etc. There were deviations in the methodologies prescribed by the ICDS as compared to the accounting standards. The Delhi High Court held that the ICDS is not meant to overrule the provisions of the Act (since they were contradicting the IT Act in many places), the Rules thereunder and the judicial precedents applicable thereto. To give more legal backing to the ICDS and remove the legal handicap, most of the changes suggested by the ICDS have now been incorporated in the IT Act itself in Budget 2018. This in a way removes the legal lacunae that the Delhi High Court had pointed out. The changes will retrospectively apply from FY 2016-17. 

 

  •  Amendment in section 80JJA - Extending of incentive to the wage bill of new employees who don’t satisfy the threshold is a positive amendment, since it removes the lacunae in the law. 

 

  • Long-term capital gains tax on gains arising from the transfer of listed equity shares exceeding Rs 1 Lakh will be taxed at 10 %, without allowing any indexation benefit. However, all gains up to 31st January, 2018 will be grandfathered.

 

  • Rationalisation of provisions relating to filing of Country-by-Country Report by providing the time-limits and the definition of ‘agreement’.


(With inputs from our knowledge partners - Deloitte Touche Tohmatsu India LLP)

The GST council yesterday (Jan 18th, 2018) announced, reduction of GST rate for housekeeping services from 18% to 5%. This comes as a big relief to Online housekeeping service providers (refer to the attachment for press release– item 5  )

 

Prior to this, the ecommerce platforms offering housekeeping services were mandated to dischanrge the GST liability of 18% on behalf of the service providers like electricians, plumbers etc making the services more expensive on the platform, as compared to offline services. This is because, services provided offline do not have to pay GST if the total revenue of the service provider is less that Rs. 20 lakhs and therefore there are no registration requirements.

 

In November 2017, the benefit of revenue threshold limit of Rs. 20 lakhs was extended to persons providing services through e-commerce platforms except housekeeping services provided by unregistered persons on online platforms as they were covered by another provision under the GST.

 

NASSCOM had raised the issue of disparity in GST levies on online housekeeping services vs offline services similar in nature, thereby putting online services at a disadvantage, at various levels including the GST council, Pre-budget consultation meet with Revenue secretary and his team, sectoral working groups for E-commerce sector and IT/ITeS sector and concerned officials in CBEC.

 

The announcement of rate reduction from 18% to 5% is aligned to what the Industry members had sought, in view that a complete exemption was not being considered. We are grateful to the Government for their support and our members for their inputs as we worked to resolve a key business survival concern.

 

 

Dear All,

This is in reference to a change in the Special Economic Zone Online Portal's pricing in October 2017. Subsequent to this the Annual usage fee of INR 10K were replaced by a monthly charge of INR 2k.

 

NASSCOM had raised this issue at all levels within the Ministry of Commerce including the Concerned Additional secretary. We had highlighted the impact particularly from small and mid-sized company’s point of view.

 

Glad to share that the requirement of monthly charges of INR 2,000 is now revoked and the earlier charges of INR 10,000 annually continue to prevail.  Some of the member companies have already received official communications and refunds on the increased charges paid. We suggest you to check with authorities in case you continue to be charged as per monthly fee.

 

The updated fee structure is also available here:

https://www.sezonline-ndml.com/fee-structure.htm

Do share your views if any.

 

Regards,

NASSCOM Policy Advocacy Team

Instructions

  1. Extract all files from attached ‘Consultation.rar’ to one folder. Keep the presentation in the same folder. Then open the presentation.
  2. Follow the instructions mentioned in the presentation.

 


We are glad to share a press release issued by Ministry of Finance (file attached) regarding the concerns emerging from the news Article on service tax notices being issues to IT companies.

 

 

The Government has vide the press release clarified that the Commissioner (Appeals) has set aside the Orders of the lower adjudicating authority where refunds were disallowed and also upheld the orders where refund had been granted.

 

NASSCOM had represented the matter at all possible forums including GST Law Review Committee, GST council and the recent pre-budget interaction with the Hon’ble Finance Minister and we are glad that our requests are considered.

 

Feel free to share your concerns if any.