STOCK MARKET BSE NSE

Compliance worries vex IT companies

If companies have overseas branch and they provide a service to these branches, the product might not be considered an export.

Published: 11th June 2017 04:28 AM  |   Last Updated: 11th June 2017 04:36 AM   |  A+A-

If companies have overseas branch and they provide a service to these branches, the product might not be considered an export.

Express News Service

CHENNAI: On the face of it, the Information Technology sector is set to pay around 3 per cent more tax under the GST regime, but they will be able to claim input tax credits on services they buy. While the input credits provision will only offset the increase in costs a little, that is not the biggest problem as the July 1 rollout nears.

“There are a lot of nitty-gritties that we have no clarity on. And these, primarily dealing with compliance, might make it difficult for the sector,” admitted R Chandrasekhar, president of the National Association of Software and Services Companies (NASSCOM), the apex lobby group for the Indian IT industry.

Other tax experts agree. “For IT, taxes are going from around 15 per cent to 18 per cent for services. Now, this is unlikely to impact consumers majorly. Buyer can take input credit for services used, but there are issues,” pointed out Sachin Menon, partner and head -- indirect tax, KPMG India. Export of services, a large revenue earner for the sector, are zero-rated, meaning companies will not have to pay taxes on exports. However, classification of what constitutes an export poses a few issues.

If companies have overseas branch and they provide a service to these branches, the product might not be considered an export. “This is an anomaly,” said Menon. Even with standard exports, if the forex (payment) is not received within 180 days, the income becomes taxable.
Yet another point of concern is the provision of intra-company services, which now need to be valued and taxes paid for under GST.

“But there is no clarity on how this valuation process would be done. We were told that self-declarations would be enough, however, we have not seen this provision announced yet. Valuations of services sold externally are easier since there is a contract that stipulates value. If not clarified, this might lead to a lot of litigation, because the tax officials do not have the expertise to value software services when it is intra-firm,” Chandrasekharan said.

However, the industry doesn’t see only problems. The GST is set to rapidly expand the number of companies that require digital services, leading to the addition of thousands of potential customers. “The pluses are largely indirect and we stand behind the GST because it will be an overall booster or the economy. We just hope that the transition will not result in a lot of pain for the sector,” concluded Chandrasekhar.



Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp