Goods and Services tax (GST) is an important tax reform. It is like a trigger, which will be resulting in big business transformation for the IT industry.
Few days back, Srinagar was chosen as the venue for the GST Council meeting, where central and state Finance Ministers met to finalize GST rates. Following this, the government has indicated that to monitor prices of various items it may set up an anti-profiteering authority.
With greater efficiency in the supply of products, enhanced flow of tax credits, removal of border check posts, and changes in tax rates, prices of goods and services may come down. Finance Minister Arun Jaitley recently stated recently stated that the Council has classified several items under lower tax rates, when compared to the current system.
However, since some tax rates such as VAT currently vary across states, the real impact of GST rates on prices may become clear only after its roll-out. For example, at present VAT rates on smart phones range between 5-15% across states. Under GST they will be taxed at 12%. As a result, while phones may become marginally cheaper in some states, their prices may go up in some others.
In the whole process, the hardest hit are the small and medium IT businesses who lack both understanding and the resources to adopt GST tools readily but no doubt are trying their best to go with the flow and groom themselves on the same.
The DQ Week took the initiative and talked to the different IT associations' executive members on the recent announcements of GST and took their reactions related to the same.
In the talking, Vipul Datta, Chairman, Infotech Software Dealers Association(ISODA)shared, " We are still waiting for a very specific input on software, and software associated services. More clarity is required as of now. We are trying to reach government agencies and trying to gather more and more clarity on the same. The only concern is that we definitely see challenges initially(in the first 2-3 months of implementation) and the concern is implementation and consolidation, the government must have some provisions to be able to comfort the community".
Sridhar Ramanna, President, Association of Information Technology (AIT) says, "There could be a short-term disruption in the computer retail and over all IT trade might take a hit due to increase in rates due to GST. The IT penetration will slow down due to cost escalation. The Governments Digital India program will also be effected, as IT infrastructure & Devices form the core of the project".
On asking about recent announcements on GST, made by the government; General secretary of All Delhi Computer Traders Association(ADCTA), Swaran Singh said, "The new announcements on taxation will not be affecting much of our business, as it will be not creating much of a difference for us. It is good for the business, but the only plea we are making to the government is that the taxation for different items should be clarified particularly to avoid confusion, smuggling and other unfair means".
General Secretary , North East Computer Traders Association (NECTA), Vikas Agarwal added,"The basic concern is that we all know that the government has made it clear that we will be getting only 40% input out of all sales, this is the biggest call for concern as of now according to me; as the IT industry is working on 3-4% of margins at maximum on retail level and around 2% on distribution level. It is difficult to liquidate the stocks as the dealers also know there is no way to buy stock and make money as GST is coming. Also there is lack of clarity in monitor business,as it should be clear in terms of taxation on particular things".
In talking to The DQ Week, Neeraj Agrawal, Secretary, Computer Association of Eastern India(COMPASS) shared, “From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated to be around 25% - 30%. Introduction of GST would also make Indian products competitive in the domestic and international markets. As far as IT market is concern and as a responsible association we have send message to all our association members for the necessary precaution / measures to be taken by them, we have send advisory to all OEM’s & vendors on behalf of Compass requesting them to co operate with the channel and to come out with prudent policies so that there is no losses to channel partner for the closing stock in VAT regime. In recent past we have organised few seminars on GST”.
Neeraj further added, “After the meeting of GST Council on 3rd/4th June we are expecting more clarity on GST and hence we are planning a seminar just after that, both with the Government Officials and GST Consultant so that our members can be updated about the FAQ’s. We expected bit lower rate of GST in IT Product which mostly is in 18% - 28% slab. We have submitted our suggestion through Confederation for the amendment but are expecting MAIT and other Federation for giving representation to Finance Ministry”.
It is difficult to predict and quantify the impact on the IT industry before the government announces the final GST rate, discussed above are some reactions from the IT association's leaders all over India on the recent announcements .