What are the benefits GST brings for the IT industry?
Benefits of GST for IT Industry is similar to any other industry with regards to freedom to bill and unfettered movement of material to any location in India. Interstate purchases will be easier with no hassle of Form C.
Moreover, GST will deliver the advantage of input tax credit which will make the purchases cheaper. IT channel partners will benefit from the input tax credit available for office equipment purchase, office rent, banking charges etc, thus lowering the fixed and variable expenses. The cascading effect of VAT, excise duty, and other taxes like Octroi will get subsumed in GST.
Further, most of the IT products, AMC and software are in the 18 percent slab from erstwhile rate of 12.5 percent excise duty and 5 percent VAT resulting in 17.5 percent overall tax. Arithmetically, there may be an increase of half a percentage point; however, it would get nullified by the input tax credit resulting in reduction of fixed and variable expenses. I am of the considered opinion that input tax credit will bring the prices down, which is quite evident in the automobile segment where companies are transferring benefits to customers on the savings through tax credits.
There are few IT products like data cables, MFDs, monitors and few other networking products which have been placed in 28 percent slab. We have already given a representation to the government. We have asked the IT minister to maintain uniformity in taxation across all the IT products. We hope the government would soon iron out the remaining few issues.
Many of the partners are raising issues around their existing stocks/inventory and prospective increase in accounting and compliance costs. What are your thoughts?
GST provisions for input tax credit on migratory stocks from VAT to GST are fair and do not affect IT channel partners with aging inventory. In fact, many of the partners maintain inventories not more than one month old. Moreover, many vendors have supported their partners for June sales out.
On the accounting and compliance front, consolidated stocking through consolidation of warehouses for better stock management should be the next step forward for IT partners. Centralized billing and administration will certainly lower the business overheads. In fact, service providers not having local offices at customer location will continue billing services from centralized location. According to me, accounting and compliance will be easier even if there is compulsion to register in other states where the company has offices.
Further, the government has extended the deadline for filling GST returns of July sales till September 10, 2017. The government also understands that a major change in the system will take some time to settle down. Hence, it is giving time to businesses to make themselves ready.
According to me, customers will now prefer to do business with GST-compliant partners only, in order to claim refunds on GST. Hence moving toward GST is a win-win proposition for all of us
What are the steps you are taking as an IT association to support your members sail through the transition period?
At association level, we have been conducting training and panel discussions on GST for our members for the last 10 months. We have also formed groups on social media and WhatsApp to share and discuss GST-related issues among the members across the country.
We are recommending members to adopt GST compliant accounting software and have worked out volume discounts on behalf of the association with software vendors. For instance, Busy Accounting Software is offering 40 percent discount to our members.