Window 7 excites partners, tax confusion still an issue

When Vista entered into the market, channel partners showed a sign of
discontentment, as they had to face grievances of the customers regarding the
performance and upgradation issues. With the launch of Windows 7 in India, IT
channel partners are gearing up for considerable opportunities in system
integration and distribution business, and they are expecting that the sale
would move up with the launch of new OS.

However, with the recently started confusion over double taxation system of
packaged software as issued by the government, partners are pointing that
charging of TDS at all level of transaction would lead to parallel import.

KK Jha, CEO, KK Software mentioned that Windows 7 is expected to create a
revolution in the market because of its advanced features like remote access
option, and advanced multimedia and graphics. Sharing his thoughts on the issue
of piracy, he said, “With this OS, it would not be easy to copy and circulate
pirated software in the market. It has got inbuilt features that would reduce
the possibilities of piracy.”

Another issue that had put the channel fraternity into a state of confusion
was the double taxation after the government had announced the abolition of
custom duty and the impose of service tax on packaged software.

Mentioning the consequences of tax structure levied by the government, PN
Prasad, Secretary, Confed-ITA mentioned that with the imposition of service tax
and VAT at the same time, TDS is bound to increase at all levels of transaction.

“This would increase the price of the software and partners will not be in a
position to enjoy margin. This would lead to rise in parallel import or
counterfeit software. Government needs to handle the situation so that it does
not worsen with time,” Prasad mentioned.

Hemant Chhabria, Regional Secretary-East, ISODA said, “Windows 7 is a very
good product in terms of its features, designs and presentation. It is easy to
use and will be accepted by the customers. However, at the dealers' level, the
charging of TDS at the transaction level is not favorable, as it kills the
margin. We are talking to the tax department and we are seeking support in this
regard.”

Jha added that that since the old inventory has been liquidated, the problem
of double taxation has been solved because the dealers are following the tax
structure as directed by the government and there is no conflict in the same as
service tax and VAT is being implemented on packaged software.

Talking about the expectation level of the channel partners about Windows 7
launch, Anil Sethi, Group Director, OEM said, “Channel was waiting for the
launch to get to know about the features and up-gradations. New versions have
always been coming and the acceptance level depends on the user's choice. Vista
could not do very well because Windows was always favorite of the end customers.
”

Sethi further mentioned that with the launch of new OS, sale is going to be
amplified since XP is no longer available and the perception about Vista was
different-this would trigger the demand of newly launched OS.

Though, much hype and subsequent excitement has been created about the
recently launched OS, the issue of piracy is still haunting the software giant.
Putting forward his thoughts on the vulnerability of Windows 7 to piracy, Sethi
mentioned, “Piracy is still a pain for us and we are making efforts to fight
with it. XP was prone to piracy because it was in the market for a long time and
the people involved in such activities had developed skill for the same. The
newly launched OS is embedded with security features that would decrease the
chances of copying the software.”

He further mentioned that by installing a pirated OS in the machine, the
probability of the computer to get exposed to malware activities increases by
almost 60 percent.

Giving his comment on double taxation, Sethi mentioned, “Whatever tax
structure is issued by the government, everybody has to follow it. We have to
abide by the law of the government. However, we had made our representation in
alliance with Nasscom seeking clarification on the issue. But now the issue has
been solved since the new tax structure is being followed on the fresh billing.”

Though, the tax structure is causing pain in the neck of the channel
partners, they are not in the position to do much about it and they have
implemented it as per the laws. Dealers are now expecting the software vendors
to take a collective step and get the matter solved.