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The much awaited white
paper on the dual GST termed First Discussion Paper on
Goods and Services Tax in India was released on November
10, 2009. GST will be a dual structure—Central GST (CGST)
levied by the Central Government and State GST (SGST)
levied by the State Governments. The timeline for
implementation has not been announced in the discussion
paper however, the possibility of a three to six month
delay from its proposed date of April 1, 2010 cannot be
ruled out. It is proposed that a two tier rate structure
will apply at both the CGST and the SGST levels. As
regards services, a single rate is expected to apply at
the Central and State levels. The exact rate schedule
for both the CSGST and SGST is expected to be announced
later.
In view of the fact that the contribution of IT sector
to economic growth is immense, it is necessary that the
concerns of the IT sector are appropriately addressed in
the proposed GST regime. The key point of consideration
for the IT sector is the GST rate for IT goods and
services. The Central Government has developed the zero
duty policy dispensation after a great deal of thought.
The IT Agreement to which India is a signatory requires
zero customs duty on import of IT goods. The Central
Government has exempted certain IT products like mobile
phones from levy of excise duty. Also currently most of
the States levy preferential rate of VAT of 4% on IT
goods. Presently service tax is levied only by the
Central Government and the IT services bear a service
tax incidence of 10%.
In the interest of the growth of the IT Industry the
present tax incidence borne by the IT sector on both
goods and services should continue under the GST regime
as well. Accordingly, the Central GST on supply of
specified IT goods should be exempt and State GST should
be levied at a lower rate of 4%. As per the discussion
paper, a single rate is expected to apply at the Central
and State levels for services and for inter-state
transactions there would be a one levy of IGST,
aggregate of Central GST and State GST. This will
increase the total service tax incidence on IT services
considerably. Accordingly to ensure that the IT sector
is not adversely impacted the IT services should be
subject to levy of Central GST only so that GST
incidence on IT services is not increased from its
current level.
The classification of software (package and customized
software) as goods or services has been a point of
litigation in the current regime of indirect taxes. As a
result of ambiguity in classification, many software
companies are compelled to charge VAT as well service
tax on value of software, which is irrational. The GST
regime should mitigate the impact of double taxation by
clearly defining what constitutes “goods” and
“services”.
GST is a major tax reform in India and the IT sector is
eagerly awaiting its introduction hoping that present
tax incidence will be maintained and also some of the
vexed issues like double taxation will get addressed
under the new regime.
Source :
Express Computer,
India,
dated
07/12/2009
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