The new Goods and Services Taxes brought about a lot of changes in the invoicing and billing mechanisms. The Information and Technology sector didn’t remain untouched along with other industries in the country. The GST is set to impose a set of some complex billing and invoicing requirements that could complicate the tax system for the IT companies. These amendments could also undermine the competitiveness of the country’s Information Technology sector.
Changes in the Supply and Valuation Provisions
The new taxation system is going to bring about modifications in the billing and invoicing methods. These requirements will get complex in the supply and cost provisions of the GST bill. It is because of the reason the IT industry now falls under the service sector. The president of the National Association of Software and Services Companies (Nasscom), Mr. R. Chandrashekhar says that the new GST law would resurface as many as 111 points of taxation. It is for the IT companies as they supply services on the pan-India basis. The IT industries, therefore, would have to register themselves in as many as 37 jurisdictions- 29 states, seven union territories and the Centre.
The Three Tax Points
Currently, a single regime governs the IT services with a single point of taxation. The new GST regime is set to introduce three new tax points for the tax payers, they are:
- The Central GST
- Inter-state GST, and
- State GST
These above three GST’s are then multiplied with the 37 jurisdictions to make the total number of points to be 111 as shown by Mr. R. Chandrashekhar. It also, means that the IT service firms will have to register and file a compliance report at as many as 111 points.
Loss for the E-commerce Marketplace
The E-commerce business stands to lose on a significant basis with the new law. This loss is because the taxation requirements on the companies that transact on the internet marketplace. The GST provision that mandates the “tax collection at source” transactions on a third party e-commerce market holds a “discriminatory” place. The new plan potentially renders the e-commerce marketplace as unviable.
Apart from this, the new GST law will also have a profound impact on small and medium businesses. Hundreds and thousands of firms that work together with the e-commerce platforms will not get a beneficial impact of the new law. They might also have to compel to seek refunds and in turn compound their working capital issues.
To know more about the business changes GST is going to bring in other aspects of the IT service industry, leave a message in the comment section below.