A leading Indian software export organization on Thursday called for the removal of a withholding tax that inhibits software exports to Japan.
Vivek Singhal, chairman of the country's Electronics and Computer Software Export Promotion Council, said the way Japan taxes services provided by Indian companies hinders software exports.
"The 20 percent levy of withholding tax by the Japanese government acts as a deterrent to the growth of exports of software and services from India as Japanese companies would route their orders to third parties such as Singapore to avoid it," Singhal said.
Singhal said this anomalous practice in information technology trade between Japan and India needs to be removed because Japan freely trades with other countries such as the United States.
Singhal made the statements during a ceremony in which a cooperation agreement was signed between the council, which is a leading export promotion organization of the Indian government, and the Japan System-House Association, an umbrella organization of Japanese software companies.
The agreement aims to provide a new thrust to cooperation in IT as stated by Prime Minister Yoshiro Mori by providing for trade fairs, seminars and workshops.
Japan is India's third largest software destination and software exports have grown over the past few years. In 1994-1995, India's software exports to Japan stood at 260 million rupees (609.9 million yen) but hit 350 million rupees (885.5 million yen) in 1998-1999, still only a fraction of what India exports to the United States and European Union.