Reapan Tikoo
Congratulations to the Government of India on releasing the National Intellectual Property Rights Policy (NIPRP). It is for the first time Government is showing commitment to Intellectual Property (IP) ecosystem in the Country. NIPRP was released in May, 2016 by Department of Industrial Policy and Promotion; the Policy is high on intent. The challenge before the Nation is to implement this intent. Bharat has to produce world class commercial and strategic IP, in absence of that Bharat is just a market and a cheap labour destination; and dependent on foreign technology for its strategic sector; remember how GPS was denied to Bharat during Kargil war or embargo after nuclear tests that denied critical technology to our strategic sector.
IP creation needs tax benefits; the NIPRP does mention this:
a) It is at page 12, point 2.16.1. of the NIPRP, which states, “Promote R&D through tax benefits available under various laws, through simplification of procedures for availing direct and indirect tax benefits.”
The following can fit into this mandate
1) Reintroduction of Section 80-IB (8A) of the Income Tax Act, 1961 with Minimum Alternate Tax (MAT) waiver fits in the said articulation.
This was recommended by Department of Science and Industrial Research (DSIR) to Finance Department a number of times. When Section 80-IB (8A) was introduced in 2002, the main shortcoming with the said provision was Minimum Alternate Tax (MAT) being still applicable; which defeated the purpose of the said provision. Based on the feedback from the R and D community of the Country, the Secretary Department of Science and Industrial Research (DSIR), vide letter No. TU/IV-R&D Com/14 dated November 28, 2014 wrote to Finance Secretary to reintroduce 80-IB (8A) with exemption of MAT. NIPRP should incorporate it and ask the Finance Ministry to implement is; delay is an opportunity loss for our Country.
2) Exemption of GST both for selling and buying by indigenous IP entities GST will be introduced any-time from now and it is important the provision is made for IP generating entities.
2.1) Equipment or license purchased by the governing body of a DSIR recognised 80-IB (8A) Research company that is designed for use, and is used exclusively in research, education, instruction or investigation, and repair to be exempted from GST.
2.2) Technology transfer or licensing of technology from Universities, Institutes and Govt. of Bharat”s Department for Scientific and Industrial Research (DSIR) recognised non-service and non-manufacturing i.e. 80-IB (8A) research companies technology transfer, product license will be exempted from GST.
3) The Finance Bill i.e. Budget offered flat 10 per cent as income tax on licensing any patented technology; with the delay in granting the patent, the date of filing should be taken into consideration for this provision.
80-IB (8A) scheme was withdrawn in 2007, though some companies will continue to avail the benefits till 2017.This provision has been considered by many as a profit-linked deduction instead of an investment in our country’s high technology IP ecosystem, which isn’t the correct way of viewing it. Actually the government has earned more as tax than it has given away in incentives through the implementation of this provision.
Building a sustainable startup based on IP is one of the most difficult businesses in the world. Chances of failure are high; the first field trials of product can fail and iterative incorporation of improvement till it succeeds can be time- and fund-consuming; this needs policy support from the government if Bharat has to succeed. Bharat remains a market and destination for cheap labour in the absence of our own industrial research capability. None of our chronic problems will be solved by outsiders, more so in strategic sector. While the scheme is in its last lap, it continues to provide innovation impetus and generate revenue for the government. If we had a thousand such companies, from different domains, imagine what it could mean for Bharat both from a problem-solving point of view as well as for revenue generation. It goes without saying that it would encourage Make in India. Since VAT/CST, excise etc. will converge into the Goods and Services Tax in time to come, I strongly recommend GST waiver for the DSIR recognised 80-IB (8A) entities.
a) Reintroducing Section 80-IB (8A) of Income Tax Act without paying MAT
b) GST waiver
c) 10 per cent as income tax on licensing any patented technology; the date of filing should be taken into consideration for this provision.
The above three can be considered as investments in building a sustainable IP ecosystem in the country and implement the intent of the just released NIPRP.
(The writer is the Chief Executive of Powai Labs,IIT Mumbai)
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