Software sector has been struggling with uncertainty in taxation matters for long. Firstly the issue was raised whether software is a goods or services. The issue was always contentious. Other issue was raised as to whether Service Tax or VAT is payable on IT services.
The issue could not be decided by most of the Information Technology companies ended up paying both Service Tax and VAT. It was a procedural nightmare to get refund of input taxes paid on inputs used in export of software. Proposed GST provisions are likely to remove these uncertainties. It is said that uncertainty in law is the greatest tyranny.
The long-awaited GST bill that is expected to unify and simplify the Indian tax structure, will be implemented from 1st July, 2017 and most industries are likely to fall under the blanket of its impact.
However, the IT sector with services such as software development, mobile app development, website design and more, is one of the major sector that is likely to be impacted. With the intention of safeguarding the financial independence of the States and the Centre, the government has proposed a dual GST structure, under which State GST as well as Central GST will be applicable for every supply of good.
Impact of GST
- GST will take out various duties for IT organizations. It will likewise permit further entrance of computerized administrations.
- Taxation on manufactured merchandise will go up from existing 14-15% to 18%, which implies the cost of hardware from cell phones to portable PCs will rise.
- GST may make numerous tax assessment focuses for IT organizations.
- GST will make a solitary brought together market crosswise over India and permit free development and supply of merchandise in all aspects of the nation.
- It will likewise take out the falling impact of expenses on clients which will acquire effectiveness item costs.
- Specialists trust that GST may increment regulatory expenses for online business organizations.
- As the Taxation Calculation Source (TCS) rules in the GST administration will build organization, documentation workload for online business firms and push up expenses.
- Subsumes multiple levies
- Clarifies taxation of electronic downloads
- Robust technology framework for implementation bringing in transparency and process simplification
- Provisions for time bound processes
- Simple, efficient and transparent indirect tax regime is widely expected to accelerate overall growth of GDP in the country with spin-off benefits for all sector including IT-BPM