ELE Times December 2016 Electronics News in India | Online Electronics Mag | Page 14

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one-upmanship to offer lower rates to attract investment but it
would now be a thing of the past (once GST is in place). Now,
comparative advantage like merit, resources and manpower, and
a level-playing field would come into force. GST will introduce
transparency and accountability.
GST will give a major boost to the ESDM industry in India,
particularly in attracting investment from outside and promoting
partnership and collaborations with Indian companies.

implementation was a major concern of the software industry
rather than tax rates. “The industry is looking at a rate of 12-16
per cent. So, it entirely depends on how it gets. But, biggest
concern is how the GST is applied,” said R Chandrashekhar,
president of Nasscom. The industry body is also concerned about
credit for taxes as the industry was predominantly focused on
exporting software. Stating that software is ‘intangible’, which can
be used and transferred between offices.

IT Partners Seek Clarity On GST Implementation

Will GST Favor ICT Industry?

In a major step towards the ‘uniformed tax’ economy, a council of
federal and state governments, announced the four main tax
slabs 5 percent, 12 percent, 18 percent and 28 percent under the
proposed Goods and Services Tax (GST). The council has proposed
12 percent to 18 percent tax slabs for consumer durables and
electronics, whereas, white goods will be taxed at the rate of 28
percent.
However, there is no immediate clarity on the classification of
electronics under the proposed tax slabs. IT channel partners
have sought more clarity of the GST implementation and hoped
that the new tax regime would positively impact the industry.
While it is too early to comment on the new tax rates, we hope
that the new tax structure will eliminate all the indirect taxes and
duties such as LBT and Octroi. It will be a big relief for channel
partners, especially in Mumbai, who have a long pending demand
of scraping of such local body taxes and duties.
Partners Uplift 12% Tax Rate
Channel partners say that the proposed 12 percent tax rate will
boost the growth of the industry at large, while the 18 percent
will not have much impact on the resellers’ business. At present
the tax on electronics, including some of the IT products ranges
between 15-16 percent. The proposed 18 percent tax on services
is also expected to impact the IT services industry which is also
currently taxed in the range of 15 percent.
The proposed 12 percent tax rate will bring down the prices of IT
product and help in boosting the market. However, the 18
percent tax rate will not have much impact on the channel
business, escape certain cities like Mumbai.

The industry bodies have by and large welcomed the new tax
structure, however, they have cautioned that the complexities of
the new tax regime might create hurdles in the implementation of
the GST. Confederation of Indian Industry (CII) suggested the
government to gradually come down to “one or two” rates of the
Goods and Services Tax (GST). “GST rate structure can be an
absolute limit of four routes as suggested by the government, and
over time, the government should commit to converge to one or
two routes,” CII .
Whereas, Confederation of All India Traders (CAIT) said that that
irrespective of rates, there should be one single return and single
authority to control the taxation system and only then the tax net
will be widen and revenue will be increased.
Manufacturers’ Association of Information Technology (MAIT) is
optimistic that the GST tax structure being discussed will be in
favor of the ICT industry. “MAIT is very keen to see
implementation of GST, which can potentially transform the
Indian economy into a major global player. While the direct
benefits would be on account of simplification of tax collection
process, we foresee substantial increase in revenue collections
that would enable government to enhance infrastructure
spending. The spending on e-Governance would also fuel demand
for IT products,” said Nitin Kunkolienker, Vice President, MAIT.
Welcoming the new announcement, Federation of Indian
Chambers of Commerce & Industry (FICCI) said that the new tax
regime would help in controlling inflation. “The rate structure will
achieve the twin objective of protecting the revenues of the
central and the state governments and further containing the
inflationary pressures that may arise consequent upon the
change of the taxation system,” FICCI said.
The implementation of the new pan-India indirect tax regime will
start next fiscal in April 2017.

Too Many Tax Slabs
According to the new tax structure that aims to keep inflation in
check, essential items including food, which at present constitute
roughly half of the consumer inflation basket, will be taxed at a
zero rate. The lowest rate of 5 per cent would apply to common
use items. The highest rate of 28 percent will apply to luxury
goods that will also will attract an additional cess. The
government said that the additional cess and a clean energy cess
would be used to compensate states for any loss of revenue
during the first five years of the implementation of GST.
Partners say that two many tax slabs will increase the complexity
in the taxation. Also, they say that imposition of cess on and
certain exceptions are diluting the basic purpose of the uniform
tax regime.

Need More Clarity On Software Biz
While the government has announced new tax rates, there is not
clarity on the taxation of software products. National Association
of Software and Services Companies (Nasscom) has said the

ELE Times | 14 | December, 2016