India’s tech industry body Nasscom is calling for comprehensive reforms to the goods and services tax system, aiming to better accommodate the needs of digital firms, data centres, and cross-border services, as it seeks to remove barriers and clarify export and intellectual property rules.
India’s technology lobby Nasscom is pressing the government for a wider overhaul of goods and services tax rules, arguing that the current framework is lagging behind the way modern digital businesses operate. In submissions to the finance ministry, the industry body has said the tax system needs to preserve credit flow, give clearer export treatment and better reflect the commercial reality of firms that now span global capability centres, engineering hubs, data centres, cloud services and intellectual property-led businesses.
A central demand is relief from blocked input tax credit, or ITC, on business expenses linked to employees and specialised infrastructure. Nasscom wants companies to be able to claim credit on costs such as transport, health cover, canteen services, crèches and workplace medical facilities when these are genuinely part of the business model and properly documented. It is also seeking certainty that data-centre equipment, including power systems, cooling, connectivity and fire-safety hardware, should not lose ITC eligibility simply because it is fixed to the ground.
That call builds on earlier industry complaints that GST rules are increasing the cost of building warehouses and data centres. Business Standard reported in August that industry bodies had asked for changes to Section 17(5) of the Central GST Act, which blocks credit on construction-related spending for immovable property in many cases. The concern is that firms can end up paying tax on cement, steel and works contracts without being able to offset it fully against the GST they charge on services.
Nasscom is also seeking clearer export treatment for digital services. It has welcomed a 2024 CBIC clarification that helped resolve disputes over data-hosting services supplied from India to overseas cloud companies, but wants that principle extended to data routing and temporary caching. The group argues that the place-of-supply rules should continue to follow the overseas customer, rather than allowing a physical presence in India to trigger a domestic tax treatment. Similar uncertainty, it says, affects engineering, testing and research services carried out in India for foreign clients or group entities.
Another issue is the treatment of cross-border intellectual property transfers. Nasscom wants the GST notification on services to make a sharper distinction between temporary IP licences and permanent transfers, so that companies involved in acquisitions, restructurings and technology transfers know in advance whether an import of services charge will arise. It says the present rules are too open to dispute for a sector where intangible assets are becoming increasingly important.
The wider agenda also includes special economic zones and e-commerce. Nasscom says exporters still face delays and disputes over refunds, endorsements and zero-rating in SEZ transactions, even though the system is meant to avoid tax on exports. It has also proposed a simpler registration framework for e-commerce sellers using warehouse networks across states. Taken together, the asks point to the same theme: GST should not turn legitimate business inputs into embedded costs for exporters and digital firms.
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