Government of India is all set to replace the present complex tax system with GST (Goods and Service Tax) from 1st July. Current tax structure of India is very complicated and exhaustive because there are various types of taxes that levied on goods and services like, VAT, Sales Tax, Service Tax, Custom Duty, Excise Duty, Corporate tax and Entertainment Tax etc. But GST is one unified tax on goods and services from the manufacturer to consumer.
GST will simplify the process of doing business in India and will eliminate the operating cost that will help in reducing the cost of goods and services as well. The IT industry of India is little bit concerned about this tax regime as the technology products are kept in higher tax slabs so there are some chances of market going down for few months. DT interacted with leading players of Indian IT industry to figure out the impact of GST on the industry and to know the preparedness to compliance tax reform from 1st July.
Impact on Business Operations
GST will change the way we do business currently. We all have to migrate our accounting & inventory as per GST regime. GST will push more traders to deploy computer systems maintain their every transaction records.
“GST will help create a single unified market across India and allow free movement and supply of goods in every part of the country. It will also eliminate the cascading effect of taxes on customers which will bring efficiency in product costs”. Mr. Mandar Joshi, Head Channel Business at DIGISOL Systems Ltd says, “GST will replace 17 indirect tax levies and compliance costs will fall. While it would bring down the cost of doing business it shall also lead to ease of doing business in India.GST will eliminate multiple levies. Passage of GST will lead to elimination of central sales tax and inter-state value-added tax arbitrage possibilities. This will lead to consolidation of warehouses and increased efficiency in the logistics chain”.
With a long experience in IT industry, Sunil Grewal, Sales and Marketing Director of GIGABYTE India comments, “GST will make India one of the biggest common market in the world; it will simplify the process, increase motherboard consumption, and reduce operation cost”.
“GST will operate and be monitored through a Robust State of Art Information Technology Network known as GSTN. This system will bring more transparency in tax collection and will help in plugging the loop holes and tax leakages. The Tax evasion will be easily detected. GST will change the business scenario of India and visibility of India as most advanced tax compliant country. Seamless, simple, transparent, hassle-free, taxpayer friendly, easy of business is the motto of this new tax GST”, adds Ms. Nidhi Markanday, Director at Intex Technologies (India) Ltd.
In his short but meaningful quote Mr. Altaf Halde, Managing Director of Kaspersky Lab (South Asia) said, “This revolutionary new step is a welcome step. GST will bring in immense clarity, uniformity, and ease. With a uniform GST now, the accounting will be far easier for our channels”.
The MD of Marg Compusoft, Mr. Sudhir Singh says, “With the implementation of GST the complexities of taxation will be reduced and the business operation is expected to become smoother and convenient. India was having the very complex tax structures till now but with the GST there will be more simplification, uniformity and transparency in all types of business transactions which is likely to revolutionize the way India will do business. With the GST implementation India will definitely see a new way of doing business in India as there will be availability of input credit across the value chain which will benefit both the supplier and the purchasing party. The whole taxation structure which was earlier burdened with several taxes will be replaced by three taxes of CGST, SGST and IGST.
Mr. Sudhir adds, “The GST regime would call in for simplification of tax administration as the three major taxes i.e. CGST, IGST and SGST will be followed across the nation. The GST has made four main slabs in the taxation structure thereby avoiding classification issues and ensuring a increase in number of tax bases and easing compliance”.
Mr. Chandrahas Panigrahi, CMO and Consumer Business Head, Acer says, “I believe implementation of GST will completely reform India’s indirect tax system. GST will combine almost all the existing taxes and will simplify the administration of tax system in India and reduce the complications too. Previously, the traders, manufacturers, and businesspersons had to pay several taxes for every activity that took place in the company, right from purchasing of raw materials to selling them to the end users. Here, GST comes to the rescue as it permits the companies a smooth and free movement of goods across borders. GST will not only change the way large businesses/companies operate but will also alter the functioning of smaller businesses. Post the implementation of GST; definitely, there will be numerous changes in the way businesses work but businesses; traders have to brace themselves and get ready in a focused and organized manner to align their structure and operations with the new GST law”.
“It will make a big impact that's for sure, as this is a very big step by this government and initial phase will be tough. Talking about the e-way bill rules, it is a cumbersome process involving multiple levels and an aberration in the smooth transition of goods as forecasted in the indirect tax structure. We believe the rules should not be enforced until the complete infrastructure system is in place for enactment of e-way bill” added Mr. Sudip De, Director at Doel International Pvt. Ltd.
The GST implementation is not only the tax reform but also it is a business reform for all businesses says Mr. Manoj Jain, VP at Microtek International Pvt. Ltd. “The Uniform tax and that also only one tax all across India is going to make products available at same price to customers in any place all across India”.
Mr. Neeraj Athalye, Head- S/4HANA, GST Adoption, Leonardo, SAP Indian Subcontinent says, “GST is not just a financial reform, but a broader business reform. It will change the ways businesses function in India, impacting all operations and processes. Every month 3-5 billion invoices will be uploaded on the GSTN portal and 51 million SMEs are expected to transition to digital framework with GST.GST will provide a great opportunity for enterprises to move beyond physical structures and adopt a complete digital infrastructure. As enterprises take steps to comply with the new tax regime, they must use new agile models of sourcing and delivery through a better supply chain. GST will unify and simplify tax structures across all Indian states, ensuring that enterprises face reduced barriers to entry and allowing the ability to compete equally. More information allows enterprises to use sophisticated analytics tools, offer personalized experiences to a diversified base of customers which in turn opens up opportunities for pricing strategies to be more real time and tailored for various business segments”.
“GST law will bring transparency in doing business and SMB community is definitely going to get the advantage out of it. However, their reliance on computers and accounting software will increase as the process of return filing is complicated and it will be difficult to do so manually”, said Mr. Rajesh Gupta, Co-founder and CTO, Busy Infotech Pvt. Ltd.
Mr. Sumeet Kela, Technical Managing Director, Netprotector says, “It will definitely help our business grow. It will also make the operations simple because of elimination of state taxes. It will also help eliminating state boundaries for doing business and business can be expanded in every state of the country”.
“The GST will definitely lead to simplification,uniformity and a hassle free environment throughout the Indian industries.A nationwide application of GSTIN and e-bill generation will make the selling process easy, efficient and effective throughout the country. There are so many other taxes like CST, Excise, CVD, Octroi, entry taxes, luxury taxes, etc., which makes doing business in India, a tedious task.After GST, things will be simplified; there will be no road permits and no forms to be filled out for inter-state selling. As traders, we were not able to get the desired input for services, although we are paying Service tax. But after GST, we will be able to get inputs for both goods and services.In the manufacturing sector, there is an excise duty and VAT(which is different in each state) which is applicable, but after GST it will just be CGST and SGST, or IGST (12%) depending on where you choose to sell your product. In simple words, GST will overcome the complexity in the Indian economy and make it a business friendly economy by simplifying everything to a great extent” said Mr. Sanjeev Bhatia, CEO, ZOPO Mobile India.
Tax Slab for IT Products
The GST council confirms 4 tax slabs under GST 5%, 12%, 18% and 28%. The IT products likely to be fall under the slab of 18% and 28%. Industry leaders reacted on the decision and share their opinions accordingly.
Mr. Manoj Jain says “Tax slabs on IT Products are 18% whereas on UPS the tax is 28% under GST, Both of the taxes are in much higher sides, UPS must be considered as part of the IT PRODUCTS and because of this high taxation the IT Industry growth will be hampered. Now the trader selling a commuter to the customer has to put to different type of taxes on the same category product. We hope the government reduces the tax slab for this category or for UPS the tax should be at 18%”.
“Yes, GST has been expecting since the beginning when we entered India market. We expected there will be a short term transitional practice in the beginning” said Mr. Sunil Grewal.
According to Ms. Nidhi Markanday, “There are certain anomalies and are likely to be taken up in next meeting. I am sure these will be resolved. The only major issues remain are area based exemptions and custom duty rate differentials on manufactured and traded items”.
Mr. Altaf Halde says, “The expected rate of GST on the IT Services sector is 17-18% which, though higher than most prevailing taxes, should be comfortable for the sector to absorb. We believe this is a progressive, bold step that will benefit the businesses, customers and the government in the long run”.
“The GST implementation is expected to bring more than 2 cr. new businesses under the new tax law. Most of them are yet to adopt IT infrastructure. Adoption of digital technology is imperative to comply with GST law. Taking it in consideration, the government should have provided rebate to ASPs who are helping the implantation of GST. The tax slab is going to leave marginal effect because in existing system the tax goes to 20% while in GST it will be 18%” , said Mr. Sudhir Singh
“GST is poised to lead our next economic growth so it is a significant and important change for all of us. The GST Council has presented a four-tier GST tax structure, under which the laptops and desktops will charged at 18% tax while other components like monitors and printers will be taxed at 28%,saysMr. Chandrahas Panigrahi.” “Post July 1st, there are possibilities that customers may look forward to buy amalgamated products like desktops and laptops as the tax charged on these products 18% rather than buying monitors other components individually at 28% tax range”, he further added.
“We are ready for GST. It’s been a long awaited reform. We had held back some product launches, some new geographical spread owing to the impending GST. Now the time has come to get cracking and move on in this fiscal” adds Mr. Sudip De
“SAP is committed towards providing innovations that will help businesses of all sizes to swiftly adapt to GST’s requirements. We have a well-defined and robust delivery program designed to deliver the GST implementation in the shortest time with minimum business disruption. SAP, as an application service provider (ASP) for GST, has been a frontrunner in reaching out to and providing technology expertise to businesses helping them prepare for transition to GST regime, through various initiatives including the launch of ‘GST in a box’ solution, as well as an online resource center at sap.com/India/Simple GST, amid others says Mr. Neeraj Athalye. “Additionally, SAP for the past twenty years has had an SAP Globalization team which has the expertise of providing country specific changes under very tight deadlines, across the world where GST or similar tax structure has been implemented”.
“After the introduction of GST, manual accounting and return filing would be challenging and users would be forced to buy computers and software. However, a tax slab of 18% would create resistance in buying the same. Tax slab of 12% would have been more suitable for IT products” confirms Mr. Rajesh Gupta.
Mr. Sumeet Kela said, “We are satisfied with the slabs announced but the overall effect will come to know after July only as prices in some categories will go up while in some it will go down. Though there is impact on prices, it is definitely going to be business friendly decision by government and it will boost economy in long run”.
“A majority of 80% of the goods and services will fall in the below 18% slab and the 20% will fall in the above 18% slab, thus reducing the cost of necessity and increasing the cost of luxury. Commodities like daily needs/essentials, raw food items, food grains, etc., that are used by common man will all be tax exempted” says Mr. Sanjeev Bhatia. “Commodities and services like luxury items, 5-star hotels, luxury cars, etc., will see an increase in their price. The presence of BCD will ensure protection to the domestic industry and encourage the ‘MAKE IN INDIA’ campaign. It will save foreign exchange and encourage youth employment. Foreign goods will not be able to compete with domestic Indian products until and unless, manufactured in India. This will also lead to increase in investments, thus leading to an overall economic growth of India.
P Venkatesh, Director, Platforms and Solutions, Maveric Systems comments, “The transition to GST is an important step in the revenue management side of the government. It impacts not only the central government, but the state governments as well. In line with such a step, the government has put in a structure that can handle teething transition issues as well as ensuring compliance with the schemes through the approval of GST Suvidha Providers (GSP).If the transition is to be effective, then the systems of GSP have to be validated thoroughly to ensure compliance and their confidence strengthened, so that they are clearly enabled to handle the transition related issues. We would not be surprised that they are neither fully equipped technically nor are they confident about handling the transition. Do we still go ahead with the roll out? If priority be given to quality in this implementation, then obviously no is the answer. However, if time is the most critical factor in this implementation, then the answer will be yes; which would also mean the necessity of a large team to address all those teething issues.
Migration Plans
GST will be a reality from 1st July 2017 and successful implementation of GST could be completed only when all organizations will be ready to adopt this tax system whether it is on the level of replacing the accounting system or on the administrative level. Below are the quotes of industry players on how they will adopt GST.
In a short note Mr. Sunil Grewal said, “We have been working with professional consultants to reduce the impacts in the transitional period”.
Ms. Nidhi Markanday says, “We are working hard to get ready. We are getting register as GST Taxpayer and updating ERP -SAP Accounting Systems in line with GST requirement. GST would require changes in the pricing method. We, therefore, exploring ways to do the same. GST would also require additional working capital, we are planning ways to do that”.
“The long-awaited Goods & Services Tax is about to become a reality soon. With a uniform GST now, the accounting process will be far easier. However, we do anticipate some teething problems, as is the case with any new law. But in due course of time, it will settle down”, said Mr. Altaf Halde
“We have been running GST awareness and knowledge transfer programs ever since the Loksabha passed GST law. In September 2016 we organized biggest GST awareness road show across the country. To easily avail the SMEs, knowledge and information about GST Marg has established 5000 GST help desks in 250 cities of the country” says Mr. Sudhir Singh. “We are using social media and blog to educate taxpayers about GST. In collaboration with various associations we are organizing and sponsoring seminars to educate SMEs about GST. Understanding the time constraints of entrepreneurs, we are organizing webinars to online avail GST information at their own place. We are collaborating with hardware and IT Infrastructure organisation so that we may offer combo and one stop software hardware solution. Apart from aforesaid, we are doing door-to door meetings, group discussions and face-to-face interaction with MSMEs and SMEs. Additionally book your GST meeting, this is new concept by MARG ERP wherein entrepreneurs can book there individual slot to have consultation meetings”.
As Per Mr. Chandrahas Panigrahi “Acer is working towards many different factors in order to get GST ready. We are working towards updating our ERP Frameworks, which is most important to oblige the complexities of computing GST. We are also working to overhauling our internal systems. Another important step for us is to understand the GST Network. GSTN, a one-stop tax portal by government will help our finance team to understand the new regulations through GSTN workshops and sessions”.
Mr. Manoj Jain said, “We are organising GST education and Training meetings in our organisation from experts”.
“SAP has an extensive ecosystem of partners, who have assessed the impacts of GST in different business scenarios and have created a robust transition roadmap for customers to quickly get up to speed with GST transition. Earlier this year, we embarked on a 21-city ‘GST Health Check Drive’ to evaluate and educate organizations that are preparing for their transition to the GST regime. This was conducted jointly with our partner ecosystem where we provided enterprises a free ‘GST Health Check’ to help them understand their GST compliance level and build a readiness plan. Consequently, we along withour partners have launched 30GST Solution Centers across 13 cities as an enablement program to fast-track readiness for SMEs. SAP is also organizing GST Fridays at these solution centers where SMEs can address their GST requirements to our partners who are fully capable of understanding customer requirements to help them identify an SAP solution that is most suitable for their business needs and go-live in 10-12 weeks”, said Mr. Neeraj Athalye.
Commenting on preparedness Mr. Rajesh Gupta says “We have always been a front runner in providing statutory compliance, and this time also we are leading. Our latest offering, BUSY 17 is fully GST enabled and is very easy to use. With the help of BUSY, a business owner can quickly generate GST invoices and file accurate GST return with any hassle”.
Mr. P. Krishnakumar, Vice President, Consumer & Small Business, Dell, India said, “A business needs to be digital to be able to adopt the new system of taxation, requires compliance through a digital platform. To be technologically equipped, small businesses need not only a PC, but technology solutions which are GST compliant. To begin with, Dell is offering the Dell Vostro notebooks and laptops, built keeping in mind the needs of small businesses. Along with this, Dell is offering packages for businesses so they can avail a combination of accounting software by Busy® and a Canon Color All-In-One Printer by paying an amount of just INR 2999*”.
“We are educating our channel partners about impact of GST on overall business and also helping them keep adequate stock so that there is no impact on them when they enter GST” adds Mr. Sumeet Kela.
Support for Partners
Vendors are needed to help their partners in adopting new tax system. Below are the ways how vendors are preparing to support their partners for easy adoption of GST.
When it came on the activities to help partners, Mr. Sunil Grewal said that “We are working together with our channel partners to get through the transition period in term of all aspect of business since April”.
“We are in touch through verbal and written communications to see that they are ready before time” reveals Ms. Nidhi Markanday.
“We have provided our channel partners with the training of GST law and our GST ready software as well. Our partner help desk is available for their assistance. We have created a ground team of good strength of to provide the on ground support. Our GST help desks are always there to assist our partners. Moreover, our product development team has been made available to them for providing them knowledge and understanding of new technical developments” added Mr. Sudhir Singh.
Mr. Chandrahas Panigrahi says that “We look forward to conduct sessions and workshops in association with experts who will brief our channel partners and will help them get clear understanding on GST. With this, we aim to help our channel partners to transit from the existing taxation method and adapt to the new technology led law with ease. We have also rolled out GST programs for retailers and consumers during the transition period. Post transition we see a huge opportunity for growth as GST kicks in. Traders and business owners will need digitization and we expect strong growth for computer segment”.
Mr. Sudip De says, “We have asked our partners to keep low inventories, clear out old stocks and ensure a fair play in business. We have not been over loading any Regional Distributor with stocks. We are gearing up for post 1st July operations”.
Commenting on GST regime Mr. Manoj Jain said, “In the same way we are also trying to educate our channel partners for smooth transition to GST Platform”.
“The role of channel partners is imperative in our business as they are the person who directly connects with end users. Our product is not off the shelf product, and only a capable channel partner can sell and support BUSY. We spend a lot of time and energy in identifying and training the right partner. Currently, we have more than 350 channel partners across India, and we are in the process of appointing more to cover each part of the country” adds Mr. Rajesh Gupta.
Mr. P. Krishnakumar said“Dell will also educate small business associations in clusters across key markets, on the role of technology in making businesses GST ready, via digital and on-ground trainings that use interactive content demos. As part of its efforts towards enhancing PC Literacy, Dell will engage with small businesses across its Dell Exclusive stores (DES) and will be launching a series of education programs across platforms, which will be implemented in 8 languages to effect wider outreach. These programs will include a basic introduction to GST, how it will impact their business, and how Dell can partner them in making the transition, without losing focus on their core business, with technology solutions which are tailored to suit the needs of a small business owner”.
“The channel is sceptical about keeping stocks of any product in June and carry it forward in July. We will help them to maintain adequate stock so that their business is not affected similarly they do not get impacted when there is transition to GST on 1st July” says Mr. Sumeet Kela.
Impact On Distribution Ecosystem
“GST is supposed to make the taxation system easy, so if you go by that, easy will also mean work getting faster and benefits says, Mr. Zakir Hussain Rangwala, Sales & Marketing Director, BD Software Distribution Pvt. Ltd. “So I don’t think prices of products will increase but at the same time one has to add the fees that will be paid to get GST ready, CA fees and consultation charges and see how it will affect their workings. What I can say is that, we will be keeping our base price the same as before and will add taxes to it as before. For e.g. Today we bill at X + CST/ VAT, after GST we will bill X + GST”.
“GST is a welcome step for business growth, having said that I definitely feel there is lack of clarity on the way forward due to so many confusing reports coming out from various quarters. Government should have been more forth right with definite time plan in giving information in advance of at least 3-4 months so that everybody would have been on the same page” said Mr. Jagannath Patnaik, CEO, NNR IT Solutions L.L.P
Further he says, “Next the Tax slabs for IT products and services are pegged at highest rate which will definitely push the overall cost for end user. The dealers have to invest more financially than earlier as the Taxes are at least 12-15% higher than the current prevailing rates. For example for a packaged Software costing Rs 500/- the dealer in the current prevailing system has tp pay VAT % or 6% extra so investment is say 525 or 530/- where as in GST system he has to pay 18% which means the invest ment is 590/- this will definitely hamper growth and business prospects for smaller resellers”.
Mr. Krishna Choudhary, Director, Rashi Peripherals says, “I am very optimist about IT market post GST. There will be significant demand for IT hardware and software from all market segments which will boost the requirement. In my opinion, except for a few products, GST rates have been announced as expected. There could be some challenge for a few products and some changes may happen before or after GST implementation. But this will not have major impact. GST on Services were expected to be around 18%, which in fact is higher as compared to current rates. But this increase will be subsidised with various ITC which was not available earlier. However, there would be some marginal increase in overhead and compliance cost, which may push overall cost. Top line will be reduced by almost 10% at same numbers, which will also see increase in overhead”.
“With GST implementation, we hope to see a fuelling growth in the IT industry. It’s a very profound economic reform and it will completely restructure the working of industries. We expect GST to bring changes in the way of carrying out business activities which would be more transparent and free from corruption. We expect this roll out to be for long term and stable. It will allow different businesses to contribute to Digital India mission by making every business activity digitized” adds Ms. Sarita Pansari, Director at Savera Digital India Pvt. Ltd.
Deployment Challenges
When a new thing comes in, it brings lots of concern, as everyone is skeptical about how they will adopt this new tax reform and what they will have to do with it. The IT Industry is expressing concerns over implementation of GST. But this new tax reform could boost our GDP.
“There are no concerns from our company to adopt to this new reforms, but the concerns have been the way GST has been projected, which has actually created fear and tension among the partners and various resellers segments bringing the business down saysMr. Zakir Hussain. “This could have been avoided. Everyone you meet today seems to be an expert of some sort on GST and will tell you one feature you don’t know and in turn making you call your consultant and clarify who in turn will say that look there is a GST meeting on so and so date and we might have clarification”.
“The biggest concern for us to handle our large reseller base whose investments are bound to increase due to the GST TAX slabs, we are taking views of our partners on the ways to cover this extra burden on resellers” confirms Mr. Jagannath Patnaik
Mr. Krishna Choudhary says “I don't see any significant concern while adopting this except for some newer compliance like matching transactions which is unique. We are equally concerned with likely mistakes which may be lead to missing of deadline and then how tax administration takes this. Transit rules look very hard at this moment”.
Ms. Sarita Pansari said that “Temporarily there will be some teething concerns as this increases account monitoring system more precisely but, overall there will be more benefits. Moreover it will bring accountability and transparency”.
Support from Vendors
The channel partners are hoping to get some help from Vendors so that they can easily adopt GST and execute their business operations easily.
“We are looking at getting some reprive in terms of input basic costs so the same can be passed on to the resellers” addsMr. Jagannath Patnaik
Commenting on what kind of support they are looking from vendor’s side, Mr. Krishna Choudhary said, “As an importer, we don’t face big challenge particularly tax credit against inventory. However, in case of local billing, there would be some challenge. The entire industry is waiting for better proposal from Government on transition stocks so the industry does not have to pay double tax. In case this happens, the burden should be taken by brand”.
