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IT Channel Grappling With GST Numbers; Seeks More Clarity

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Kolkata/Chennai: With barely weeks to go before India adopts a unified form of indirect taxes under the GST regime, opinion seems to be divided on it’s impact on the IT products and services baskets, with experts suggesting that end-customers would stand to gain through lower prices while the small retailers and distributors may face a negative impact, especially in the short to medium term.

While most trade bodies welcomed the GST initiative, they expressed disappointment over the GST Council’s decision to fix 18 percent tax rate on IT services, which is three percent higher than the current 15 percent services tax.

Though the Union Government has been quite pro-active in terms of holding discussions with stakeholders while arriving at GST taxation quantum for specific industries and products, the industry feels that it may take some more time before clarity is achieved on the tax as well as any related Cess that might be charged on the same.

Uday Pimprikar, Tax Partner, EY India said that “Imposing 18 percent tax on IT/telecom is likely to increase the overall tax burden and therefore may have a negative impact on the consumers’ expenses. It needs to be appreciated that these products are extremely important infrastructure and thus deserves more sensitive treatment.”

The Confederation of All India Traders (CAIT) said there were several disparities and ambiguities in the classification of items under the GST tax slabs. “Though trade and industry stands in support of GST. Regrettably, so far, no concrete steps have been taken to take stakeholders into confidence,” Praveen Khandelwal, secretary general of CAIT, said in a statement.

According to market sources in the IT industry, most of the IT products has been put under the electronics, electrical and home appliances category. Until now, here’s what the IT channel may expect from the GST council’s guidelines:

– Printers, scanners and copiers are the key IT products in the channel industry. Despite trying their best online, still channels is the key bread and butter for printers and dependent products. The sale of accessories like cartridges are also a key sale-aspect for printers. The document published after the GST council claims that printer, photo copying, fax machines, ink cartridges will be charged 28% tax on the sale value.

– Despite the desktop segment has been negatively growing the in the recent days, monitors play a significant role in the assembled market segment. Projectors are also one of the key ways channel partners are making money both in terms of sale and rentals. According to the new GST council’s outcome, monitors and projectors, are categorized under the 28% tax structure family.

– With the advent of the audio and video gadgets moving more on the lifestyle products, the sale of speakers, headphones and mikes are a key sale product for the channel community. It is also believed that web-cameras will also be in that category.

– Most of the IT hardware products come under the 18% family. Even though, there is no source for finding the actual rates for the IT/ICT products in details, most of the hardware products including mobile phones are coming under the 18% family. GST on IT Software on media also comes under the 18% family.

However, according to an IT trade body from Central India, greater clarity is required and a lot of clauses are missing in the current announcement. A spokesperson mentioned, the government should form a high-level committee of senior officials and representatives of traders to iron out such disparities for smooth transition to the GST regime.

Channel partners and analysts believe that by the first week of June, there will be greater clarity on the products that come under various tax family structures.

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