The GST regime slated to be rolled out from April 1, 2017, should ensure that issues like complex billing and invoicing requirements and reverse charge on import of services do not impact the export competitiveness of the USD 110 billion sector, industry body Nasscom said today.
Nasscom, which represents IT firms like TCS, Infosys, Cognizant as well as e-commerce companies like Flipkart and Snapdeal, lauded the passage of GST Bill saying the new regime will streamline the taxation system, making it more transparent.
"The GST bill will have positive impact as it subsumes multiple levies, clarifies taxation of electronic downloads and is widely expected to accelerate overall growth of GDP in the country with spinoff benefits for all sector including IT-BPM," it said.
However, companies engaged in the supply of services on a pan-India basis will have to seek registrations in 37 jurisdictions, that is, 29 states, seven union territories with legislature and Central government, it added.
Export competitiveness of the IT sector could be impacted due to complex billing and invoicing requirements due to place of supply and valuation.
"Another issue that needs to be addressed is the reverse charge of GST on import of services, used as inputs for services that are exported...This can lead to locking in working capital," it said.
Explaining the concept of a reverse charge, Saloni Roy, the Senior Director at Deloitte, said that export-oriented companies pay service tax for import of services (say ERP licence or management consultancy fees), and although the same can be claimed as refund, it involves delays.
"So far reverse charge was applicable only on services, but with GST it will be extended to goods also. But, one needs to see what goods and services are prescribed under this," Roy said.
Also, for SEZ units that were permitted upfront exemptions, will now necessarily need to apply for refunds, Nasscom added.
"The services industry at large was administered under a single authority in the centre under the Service Tax regime. The simplicity and certainty that it offered needs to be emulated in the GST law that States and Centre adopt subsequently," Nasscom President R Chandrashekhar said.
The new tax regime should also be future ready and cater to the needs of the emerging digital economy in the country, he added.
EY India's Vivek Pachisia agreed. "The lack of clarity around continuation of indirect tax exemptions for IT/ITeS exporters and possible higher rate of taxes applicable to IT products and software under the GST regime, are some key issues that may need redressal," he said.
Nasscom also highlighted that GST's provision mandating 'tax collection at source' for transactions on third-party ecommerce marketplace are "discriminatory" and can potentially render such models "unviable".
Moreover, this is likely to negate the beneficial impact of eCommerce on lakhs of small businesses in the country by compelling them to seek refunds compounding their working capital problems, it added.
