Budget: Data centre cos seek industry status, concessions for green power use

“The GST legislation taxes for domestic industrial services, at 18%, will apply to data centres as well. However, data centres, operating for overseas customers, are expected to continue being treated as zero-rated export supplies. Adoption of green technologies by data centres could also be provided a beneficial tax treatment,” M.S. Mani, partner, Deloitte India, said.

B.S. Rao, vice president, marketing, CtrlS Datacenters, said the government should waive GST for under-construction data centres and give some concessions to functioning centres, besides tax concessions for using green technologies and industry status for the entire sector. Data centre firms also want waivers for electricity for five-seven years from the date of commencement of a unit, said Rao, adding that cost subsidy of 40-60% would help firms such as CtrlS.

Manoj Paul, managing director, Equinix India, said the government should make provisions in the Budget for “big investments” in power generation and improving power distribution infra for upcoming data centres which will need hundreds of megawatts of power to run efficiently. “The industry has also highlighted changes needed in power distribution policies to enable the data centre industry to use green power more effectively,” he said, and added that a “clear roadmap” for data protection policies is needed.

Data centres are driven by deeper internet penetration, increase in digital data traffic, public cloud services and higher expected growth for internet of things (IoT). The data centre sector is expected to draw billions in investments over the next few years, as India is expected to become a hub for Southeast Asia’s digital ecosystem. For instance, Singapore-based realty firm CapitaLand said it will invest $1.5 billion-$2 billion to ramp up its data centre presence in India.

Sunil Gupta, co-founder and chief executive, Yotta Infrastructure, said government expenditure in capital goods, engineering, and infrastructure is expected to increase, aligning with its vision of transforming India into a data centre hub. Industry experts also said that stimulus packages for the industry should be fast-tracked. Besides, many data centres are looking for clarity on India’s data protection regulations. The panel on Data Protection Bill tabled its report in the Winter Session of the Parliament in December 2021, but the final bill is yet to be cleared.

Gupta said the bill must create a framework to host third-party data centres and implement the proposed Data Center Incentivization scheme.