Does this Cloud have a silver lining?

The new Budget provides for tax sops to attract more foreign investments in India’s data centres. So why are some Indian players upset?

- AVIK DAS & SHIVANI SHINDE

The government's decision to provide tax holidays to foreign Cloud service providers (CSP) till 2047 will bring much-required clarity on taxation issues, but it has clearly divided the data centre industry in the country.

For hyperscalers like Google, Microsoft and Amazon Web Services (AWS), this is a welcome move. For a lot of Indian data centre providers and Cloud services players, however, this is a biased play.

According to Minister of Electronics and Information Technology Ashwini Vaishnaw, in comments made after the February 1 Budget, the tax holiday could attract $200 billion worth of investments.

But the Bharath Digital Infrastructure Association (BDIA), which represents local data centre operators, disagrees, citing the Budget’s use of the word “reseller” to describe Indian businesses.

‘The Budget proposes “a tax holiday up to 2047 to any foreign company who provides services to any part of the world outside India by procuring data centre services in India. Sale of such services to Indian users shall be made through an Indian reseller entity and taxed appropriately.”

Abhishek Bhatt, secretary general, BDIA, told Business Standard that “to achieve true digital sovereignty in a era where data localisation is a growing global mandate, we must ensure that the role of Indian entities is not inadvertently limited to that of a ‘reseller’ or ‘toll collector’ for foreign platforms. Such a model siphons high-value platform margins offshore while leaving domestic firms with thin distribution residuals”.

Some of the players that Business Standard spoke to also said that by using the word ‘reseller’ the government is diluting the role of Indian data centre and cloud service providers.

“What was the need to say that the tax holiday is for ‘foreign’ players? It could have given a fair footing for all,” said a source on condition of anonymity.