Proposed US outsourcing tax may hit India's IT sector

IN A TIGHT SPOT

- URVI MALVANIA

A NEW LEGISLATIVE proposal in the US, which seeks to impose an additional tax burden on companies that outsource jobs overseas, has added a fresh layer of uncertainty for India's information technology (IT) services sector.

The move could weaken two of the sector's biggest strengths—healthy order inflows and pricing stability.

The Bill, tabled by a Republican senator, is yet to become a law, but even in its current form, it raises the prospect that US enterprises—the single-largest customer base for Indian IT majors—may revisit their technology budgets. Any such reconsideration could slow the momentum of contract closures.