The earlier VAT/service tax management in India was complicated due to multiple taxes, immeasurable compliance obligations, and tax cascading. Under the GST management, it will result in a simpler tax system, especially for the IT sector.
Tax Rates under Excise/VAT/Service Tax
Under the old tax regime, the sale of packaged software attracts both VAT and service tax. VAT rate is around 5% in most states and service tax rate is 15%. Excise duty is also applicable in the case of manufacturing of IT products.
Example: If software comes on a CD, DVD or hard disk, then there are 3 taxes that apply to it.
• Excise duty for manufacturing of product
• VAT for sale and
• Service tax for providing service as software can be downloadable for multiple times.
All such complications and double taxation will be removed under GST.
There are always pros and cons to every policy change by government, and GST is no different from this. Though it is a long term strategy, and the positive impact shall be seen in the long run only, GST will act as a future proof for Indian businesses to become workable. If Government keeps checking and addressing the concerns, ease of doing IT business won’t be hampered. Also, it should keep rewarding the IT Industry, which is the power house contributor to India’s GDP and economic growth.
For eCommerce traders, the GST is expected to increase administrative costs. Also, since e-tailors have hundreds of sellers on their platforms, it significantly increases compliance burden. Small sellers will face cash-flow issues and will claim for refunds on the tax paid on inputs, which the eCommerce platform may not support. The tax collection at source (TCS) guideline under GST will increase the administration and documentation workload for eCommerce firms.
GST Ready Software for Billing, Accounting & Inventory: http://www.parulsoft.com/gstpro/companyregister/companyregister.php