India’s IT sector nervous as US mulls outsourcing tax

India's massive IT sector faces a lengthy period of uncertainty with customers delaying or renegotiating contracts while the US debates a proposed 25% tax on American firms using foreign outsourcing services, analysts and lawyers said.

- Reuters

The sector is likely to be on the receiving end of a bill which, though unlikely to pass in its nascent form, will initiate a gradual shift in how big-name firms in the world’s largest outsourcing market buy IT services, they said.

Still, with US firms having to pay the tax, those heavily reliant on overseas IT services are likely to push back, setting the stage for extensive lobbying and legal battles, analysts and lawyers said.