Budget 2012: Abolish MAT levy on SEZ units/developers, says E&Y's Patel

Romit Patel, Senior tax professional in a member firm of Ernst & Young

The Indian technology sector has been positively influencing the lives of its people through an active direct and indirect contribution to various socio-economic parameters such as employment, standard of living and diversity even during the recessionary period and global downturn.
However, this sector has its share of concerns. Fears of downturn in the US, instability, pricing pressures in the domestic market, wage inflationary pressures and protectionist policies in the US, etc. In the backdrop of this mixed economic scenario, the industry is keenly awaiting the Budget.
Levy of Minimum Alternate tax (MAT) on the Special Economic Zone (SEZ) has significantly diluted the benefits offered under the popular SEZ regime.  This has made the otherwise populous SEZ regime, unattractive for IT companies from a future expansion perspective.
Another point of concern is the carry forward and set off of MAT credit entitlement, which is presently only allowed for a period of ten years.  Abolishing MAT levy on the SEZ developers/ units and carry forward of MAT credit entitlement for an indefinite period would certainly be a positive measure for this sector. 
Characterisation of payments received for use or right to use software products has been a contentious issue in recent times. 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 spate of do not seem to accept this distinction.  As the stakes are high, the sector would like to get clarification on whether payments made for the use of shrink-wrapped software would be taxable as royalty or not to avoid uncertainty amongst tax payers.
Safe harbor rules to operationalize the safe harbor provisions so as to reduce litigation and disputes, thus easing compliance burden for the taxpayers and reducing administrative work for the tax department.  The Government should also consider laying down definitive guidelines / framework for implementation of an Advance Pricing Arrangement (APA) framework, wherein a taxpayer could enter into an APA with the Revenue authorities as regards its transfer pricing arrangement with group companies.
The industry and trade is also concerned as to whether the Government considers software as goods (subject to VAT) or as services (subject to service tax). The sector would like to get a clarification on whether packaged software should be considered as goods or services and if the same is considered as a service, the State VAT authorities should be directed to exclude levy of VAT on software transactions.
Clarification on transitional provisions under Goods & Services Tax (GST), specifically CENVAT credit to be carried forward into the GST regime, and eligibility and process for refund of unutilized credit. (Views expressed are personal)