Indian software product firms seek elimination of Softex forms, other reforms

Indian software product firms have called for reforms in the sector to help them compete with global rivals. Around 120 companies, including Quick Heal Technologies, Zoho, Freshworks and Tally Solutions have written to Union Minister of Electronics and IT Ravi Shankar Prasad. The companies have requested the government to do away with tax deducted at source (TDS) on local software products and Softex forms that assess the value of a product each time it is exported.

"We have represented through iSPIRT - a software products industry lobby group - time and again to remove both these provisions, to no avail," the letter said as per a report by The Economic Times. It is a much-needed reform considering the present global economic conditions, it said.

"After the Goods and Service Tax (GST) became central to all sales and purchase data, these provisions are totally redundant, especially for the software products industry," said Sudhir Singh, a fellow at iSPIRT.

In 2019, India announced a software product policy to promote local production companies.

"After the announcement of the software product policy, the industry expected that the government will make sweeping reforms to promote this industry," the letter added.

As per a study by Nasscom, the Indian Software as a Service (SaaS) industry touched $3.5 billion in revenue in the financial year 2020.

The elimination of the Softex forms will dramatically increase ease of doing business for product companies, specifically for SaaS companies.

Suresh Sambandam, CEO of SaaS firm Kissflow, said that the mission is to transform India into an IT products destination.

On the need to remove the Softex process to export software products, Sambandam said, "Sometimes, we generate invoices for $30. When done for IT services, you do consult exports in millions of dollars, so it makes sense to go through the process, but not for making invoices at such trivial values and when the products are already priced."

The IT Ministry should remove hurdles around ease of doing business for the software products industry, said Nakul Saxena, Director-Policy, iSPIRT. "The government should also quickly introduce incentive programmes for MSMEs to buy Indian software products," he added.