Nothing has alarmed the Indian BPO industry as much as the government's proposal to tax some BPO activities. In this "virtual" round table organized by Ernst & Young, BPO company heads and experts sound the alarm bells. WHAT CBDT SAID "Where a non - resident or foreign company outsources the whole or part of its core revenue generating business activities to an IT - enabled entity in India, such as the services of a travel agent, software developer, software maintenance, Investment consultant, debt collection service etc, and the IT - enabled entity in India renders the services either directly to customers abroad or through the non - resident principal, a considerable portion of the profits derived by the non - resident or the foreign company from its customers abroad would certainly be attributable to the activities performed by the IT - enabled entity in India.

If such entity constitutes a permanent establishment of the non - resident or foreign company in India, such attributed profits would be taxable under the Income Tax Act, 1961, in accordance with the provisions of the relevant tax treaty." India is increasingly seen as the BPO destination of the world. Multinationals and entrepreneurs alike are committing huge sums of money for business development in India. If the government resorts to any taxation at this stage of BPO - whether of core functions or incidental operations - it would do more harm than good. Even though the fiscal implication is low (given the existence of a double tax treaty arrangement between countries) this move will lead to a short-term deferment of offshoring decisions. A business flourishes more when it is left to itself - which is what the government mostly did with the software industry. An investment - conducive environment bodies well in the long run not just for the government's coffers (and pride) but also for common people who stand to gain from the huge employment opportunities created through new business growth. In my opinion, in the larger interest of the economy and its people, the government should desist from setting up any barriers to the business for the BPO industry at the moment.

Instead, it should devise ways to give further impetus to the BPO industry in India to enable India to gain an edge and increase its share of the growing BPO pie. If the government resorts to any taxation at this stage for the BPO industry, international clients will go to other tax - friendly countries like Philippines or Mauritius. The BPO industry in India has greatly added to the overall growth of the Indian economy in terms of the employment generated and the creation of ancillary industries like transport, catering and training, which in turn are generating substantial tax revenue. A tax - free status for the entire BPO industry will enable us and our clients to invest more in India and further benefit our economy