GST Amendments Evoke Positive Reactions From IT Channel
Channel partners have welcomed the historic Goods and Services Tax (GST) Bill passed by the Rajya Sabha on Wednesday. Channel partners said that the bill, which proposes uniform taxation across the states, will bring ease of doing business and resolve various challenges in the current indirect tax landscape. Partners said that GST would facilitate hassle free movement of goods and services across the region and benefit both dealers as well as end users.
The much awaited GST bill finally got approval in the Rajya Sabha as the government pacified opposition’s resistance by agreeing to make crucial amendments in the bill. The GST bill aims to reform the taxation landscape in the country by bringing uniform tax structure. The bill is now slated to head back to Lok Sabha on August 8 for the ratification of amendments moved in the Upper House. GST which will be implemented from April 1, 2017, is expected to impact the IT-BPM sector, which is currently valued at USD 143 billion (2015-16).
Champak Raj Gurjar, Managing Director of Maxtone Electronics said that GST will indirectly put pressure on all the OVMs to bring direct billing policy and ultimately benefit the channel. “With GST coming in the force, dealers can bill from any part of the country as now there will be once unified tax. We hope that GST will eliminate the “Inspector Raj” as there will be only one department partners will deal with,” Gurjar said.
The GST is also expected to reduce corruption while tax assessment and will bring in fair competition and eliminate cross boundary trade barriers. With GST comes in, companies now will not require to have registered office in multiple states they trade in. Therefore, it will benefit the business in a big way.
Channel partners are happy because the new tax structure will bring e-commerce players under the purview of taxation. Offline channel has always alleged tax evasion by online players which is expected to be wiped out with the new tax policy, “The GST will benefit the offline channel in a big way as all the e-commerce platforms will now come under the purview of the tax regime. OLS, which always enjoy the benefit of different tax structures in different states, will now have to pay unified tax. This will create a level playing field for the offline channel,” said Manoj Jain, owner of One Computers.
The GST is also expected to resolve the long pending issue of double taxation of software products. However, partners have demanded more clarity from the government on the service tax. “As there will be a standard tax practice across the country, we hope that it will resolve the issue of double taxation. However, we are yet to get a clarity from the government that how they will treat service tax on software offerings,” said K R Chaube, Director at Techlink Infoware.
However, some channel partners have raised apprehensions on the proposed 18 per cent tax rate. According to media reports, the government is trying to fix the tax rate between 18 to 20 per cent. While the government yet to finalize the new tax rate, the partners said that it is higher than the present tax structure. “If we consider the present tax structure which includes VAT, Excise duty and Octroi, it is less than 18 per cent. My fear is if one party fails to pay the tax, the other party which has bought goods or services will not get the set off. We face this issue with VAT as well. The 5.5 percent is absorbed in the course of business, as per the new tax policy 18 percent will cost huge to dealers and end users”, said Sanjeev Pathare, owner of Computer Shoppee.
The new rate is expected to increase the cost of goods and services in the short term but benefit the industry in the long run. Devendra Deshmukh, CEO of eZest Solutions said, “GST will increase costs for IT services industry in the short run. But in the long run, it is beneficial due to ease of compliance and overall better tax regime across the industry.”
Channel partners are very optimistic about the government’s move towards “One Nation, One Tax” policy and said that it will definitely bring “Acche Din” for the IT channel business.