VAT woes riles Karnataka IT associations

The applicability of E-Sugam on 'computer hardware' has raised VAT woes among Karnataka's IT Dealers. According to a new notification by Karnataka's commercial tax department on 9th October, IT dealers were given a clear understanding that "Computer Hardware" is exempted from VAT. While listing out the commodities for which E-Sugam is applicable from 1st of November, 2013, the Item No.19 says "All kinds of Hardware, excluding Computer Hardware". After FITDAk sought clarification on this, the tax department said that Computer Hardware too comes under the scope of E-Sugam, since computers & their parts consist of electronics.

IT associations of Karnataka in a letter to the commissioner of commercial taxes, Ajai Nath urged to to give a clear mandate that E-Sugam is not applicable for Computer Hardware. Ever since the inception of the KVAT act in the year 2005-06 computer hardware and electronics goods were given different classification. ‘Electronics Goods' & ‘Computer Hardware' (Computers, Peripherals & their parts and accessories) have been given different classification from the days of KST Act. While Computer Hardware is 5.5% KVAT, the ‘Electronics Goods have been 14.5%.

Anand Rao Balluru, President, FITDAK, says, "If computer hardware comes under the generation of e-sugam entries then dealers have to undertake an herculean task to file taxes for every product they dispatch". In all the 30 Districts in Karnataka there are approximately 2500 registered dealers & over 60 major Nds, OEMs, and IMCs. The invoices generated roughly are over 30,000 & there are several establishments used to a billing of over 100 per day. Generation of several E-Sugam entries each day call for dedicated man power, uninterrupted power & internet, consumption of stationery, deployment of other logistics' resources, which will only add to the operating cost in business. Anand Rao says, "The end use & utilities of electronic goods & computer hardware are altogether different & both cannot be categorized under same classification not only in the context of E-Sugam but for any other relevant levy". FITDAK has requested the commercial tax department to confirm the exemption of 'computer hardware' from the applicability of E-Sugam.