A Sector With Multiple Challenges
The $155-billion India’s IT industry is wary about the GST rollout despite the opportunities it brings and promises it makes for a simplified tax regime. Under the current service tax regime, IT companies have a centralised process of registration, but with GST, registration would have to be done in every state at place of supply.
“For an industry reeling under twin challenges of business model change and increased protectionism in the markets they serve, multiple registrations would only add to its woes and reduce global competitiveness,” says Arvind Thakur, CEO and Joint MD, NIIT Technologies. “The solution that needs serious consideration by GST Council lies in enabling a single registration for IT companies for pan India,” he adds.
The IT industry’s apex body Nasscom had earlier stated that the industry is discussing the challenges related to multiple registrations in each state and associated complexities that may arise in the GST regime.
Given that the entire GST ecosystem is based on an IT-enabled platform, its success will largely depend on how quickly the various companies adopt to the technology. The government has entrusted the Goods and Services Tax Network (GSTN) to act as the IT infrastructure backbone to provide shared IT infrastructure and service to both Central and state governments including tax payers and other stakeholders. It will be the interface between the government and the taxpayers providing all front-end services like registration, returns and payments.
However, many companies are yet to have their IT systems in place to be able to comply with the new taxation regime. This is creating a fresh set of challenges for the IT service providers and vendors who may have their solutions ready but many of their customers are actually not ready to adopt them yet.
To ensure a seamless customer experience, Oracle released their GST solution in a phased manner beginning November 2016 followed by March and the latest update in July. “Whenever there is clarity on a particular law, we release that part,” said Ajay Kumar, Director, Sales Consulting – ERP, Oracle India. “Customers are at different levels of maturity, but if you give them a good value proposition, they are willing to invest in GST-related technologies.”
Even the hardware industry is concerned with the exact GST rate applicable to IT products. MAIT, the apex body representing India’s IT hardware sector, has expressed its concerns and requested clarity over the new tax slabs with the Finance Ministry especially on rates levied to printers, monitors, projectors and data cables.
The government has undertaken a fitment exercise to arrive at the rate of GST applicable on various products wherein the fitment rate on printers is at a maximum of 18.5 per cent (excise duty of 12.5 per cent and VAT of 6 per cent). “Therefore, it is recommended that tax slab for printers, which is subject to 28 per cent should be omitted,” said MAIT in a statement. This will ensure that printers are subject to tax at the rate of 18 per cent, closer to the current numbers.
Expressing concerns on the anomalies in GST regime, Nitin Kunkolienker, president of MAIT, says, “The Finance Ministry immediately needs to clarify anomaly in tax slabs in printers, projector and monitors. All of these items along with IT accessories collectively form an important part of Digital India and they should be taxed at 18 per cent to make Digital India successful.”
