Dismiss Notice
Welcome to IDF- Indian Defence Forum , register for free to join this friendly community of defence enthusiastic from around the world. Make your opinion heard and appreciated.

Impact of Goods and Service Tax on Indian IT Sector

Discussion in 'World Economy' started by gsthelpline, May 23, 2017.

  1. gsthelpline

    gsthelpline IDF NewBie

    Joined:
    May 23, 2017
    Messages:
    1
    Likes Received:
    0
    Country Flag:
    India
    The long awaited Goods and Service Tax (GST) Regime is finally going to implement from 1st July 2017 in India. It will replace several taxes such as excise duty, VAT and many more taxes levied by the Central and State Government. One common or unified tax will be applicable across the whole supply chain. IT sector is one of the sectors is likely to be impacted by the implementation of GST in India. Keeping in mind the financial independence of the States and the Centre, the Government has planned a dual GST structure i.e., Central GST and State GST will be applied at each stage of the supply chain. According to GST Council Meeting, Information Technology services will fall under the category of 18% slab rate.

    Remove Cascading Effect of Taxes
    Cascading effect of taxes will be positively addressed under GST Compliance. Traders or businessmen under GST are entitled to claim for credit of tax in the case of AMC (Annual Maintenance Service) contracts. Under Present taxation structure, IT Service Providers are not eligible to claim the tax credit which includes the assessment or charges spent on setting the IT infrastructure. After the implementation of GST in India, both IT Service Providers and clients will be entitled to claim for credit of tax. Several levies across the supply chain with the regulations on tax credits will to a great extent curbed in GST. Service sectors now will be applicable to take credit of tax (VAT) paid on input goods. It is expected that GST will remove cascading effect.
    read Full Detail: http://www.gsthelplineindia.com/blog/2017/05/23/gst-impact-on-it-industry/
     
  2. gstkeeper

    gstkeeper IDF NewBie

    Joined:
    Jun 16, 2017
    Messages:
    1
    Likes Received:
    0
    Country Flag:
    India
    Here are most crucial ways in which GST will Impact Information Technology

    The long-awaited GST bill is going to implement from 1st July 2017 which is really a need for India’s economy and content GDP growth. However, the IT sector with services such as software development, mobile app development, website design and more, is going to affect significantly after the implementation of GST in India.

    Tax Rate

    Under our current tax structure, the sale and purchase of packaged software is entitled to both VAT (approximately 5%) and service tax (15%). The VAT on sales is directed to the state government whereas the service tax on service follows the central government. There are also cases where along with the VAT and service tax, excise duty is also applied due to lack of clarity from the government. However, it is expected that once the GST is implemented, the current average tax rate of around 25–35% shall come down to around 18–25%.

    Complete Business Process Change

    Under GST, which is a destination-based tax, the tax is collected by the state where the goods or services will be consumed without any state or central concept. IT companies will, therefore, have to bifurcate their services and bill their customers based on location of consumption.

    More to know: Benefits of GST on Indian Startups

    eCommerce Sphere

    For eCommerce traders, the GST is expected to increase administrative costs. Also, since e-tailers have hundreds of sellers on their platforms, it significantly increases compliance burden.

    Even though new provisions under the GST structure such as time-bound processes and clarity on electronic download classifications will ease the process of conducting business for IT companies, there still remain several concerns, especially tax exemptions, which need addressing. The government should ensure the GST legislation addresses the aforementioned challenges so that the reform turns into a success for the IT sector.
     

Share This Page