Bigger India
Indian IT firms looking for ways to soften US tax blow
10% tax on payments from US units may affect Indian software companies’ export competitiveness if the costs are passed on to customers, say experts
An anti-abuse provision in the US tax code that President Donald Trump signed into law last month is forcing Indian information technology (IT) services companies to look at ways to mitigate the impact of the tax blow.
The Tax Cuts and Jobs Act, designed to encourage American companies to invest and create jobs locally, seeks to discourage offshoring of work to overseas group companies by way of a 10% tax on the payments made to such offshore entities.
This tax, called the “base erosion and anti-abuse tax”, or BEAT, hits Indian multinational companies in the IT sector, which caters to their US clients through American subsidiaries.