GST: Unity in Diversity?
Different states have contradictory views on GST. Will India have a smooth uniform tax regime?
The Goods and Services Tax Bill or GST Bill which has become the buzzword for now, officially known as The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014, proposes a national Value added Tax to be implemented in India from 1 April 2017.
“Goods and Services Tax” stands as a comprehensive indirect tax as far as the verticals of manufacture, sale and consumption of goods and services throughout India are concerned, to replace taxes levied by the central and state governments. Goods and Services Tax would be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method. As for now, the Bill needs to be passed at least by 17 more states with two-thirds majority for the Bill to get constitutional validity.
Based on analysis, GST will be largely a beneficiary for Automobiles, Cement, Media and Entertainment sector. GST will have a negative impact on service industries such as restaurants and quick service restaurants (QSR). Impact of GST for hotels will be depend on its location whereas for real estate it will depend on its treatment with regards to agreement value. The Question which arises here as to which segments stand to gain and which won’t with the implementation of GST?
GUJARAT SPEAKS ON GOODS AND SERVICES TAX
Of late there has been a lot of buzz that has been created by the GST bill all across the length and breadth of the Indian landscape as some people opine it will be conducive for business prospects, while some think it will not put any major effect that will be epoch making on the market.
As it has been the case that every individual wants their business growth to ascend so it is by default that they are thinking on behalf of their personal priorities but then again, in reality, the GST is meant for the whole market as it does not fall under a single person’s business domain . All said and done, It is early to say something about it before it the bill is implemented.
It is on these lines Rajesh Mehta, President, BITA, Baroda in an interaction with DQ Channels went on to state that “Every state has its own policy on entry of goods in state and the central government is saying that GST will be implemented on 1-04-2017 but how the state government reacts on it and also what changes will be made for different states
in GST so it will not harm the business of any state”. He informed, that , “If there is any change in the import policy as 35% tax will put down to 18% than it will be good for market”.
The reason to think behind the backdrop of it all, almost every dealer might have some stock on which they have already paid the taxes on current taxation policies but after the implementation of GST any slashes that might be seen in taxes, there may arise some losses which needs to be borne by the fraternity of IT channel partners.
Commenting on this burning topic Paresh Babaria, President, SITA, Surat had this to say, “It is a very positive thing and it will help to increase the business of IT market. It will help Gujarat to grow overall” . On the topic of online market growth he added , “Online market is doing good and government is also supporting it so it will grow due the presence of lots of funds behind them but how long they will burn their own money. So time will come it will all become stable” .
Its good for everybody as per my view , the different taxes for different states will not occur and everybody will come at same level to sell product and whosoever has knowledge and contacts will grow and do good business. On comparison with online market he delineated , “their is no any entry tax on entry of online goods as other states have but see what will happen after the implementation of GST and what steps will taken by new government in Gujarat” .
JAMMU’S VIEW ON GST
Dikshit Gupta, President, Jammu Computer Dealers Association (JCDA) on GST: As it is not cleared till now as to what is actually in GST, there are a lot of misconceptions about it because of which we are still confused.
If the Government fixes GST in between 15%-18%, what will be its effect on market?
Dikshit Gupta: If it will be fixed in between 15%-18% than it depends as to how much it is reduced and how much it will effect the uniform tax. As the projection made by the Modi Government it hardly make any difference, only 1%-2% benefit will occur as it will remain same as earlier.
It will also affect at the local level as it can be a reason for shifting of local distributors or the fraternity of National Distributors from Jammu to that of other places and landscapes like Ludhiana and Chandigarh because of the unavailability of products due to cost cutting. It will be beneficial for the big players.
On the topic of tackling with the online market: It depends on the government as to how it will take care of retail market by putting some restrictions on the online market , as the Kerala state government has put 13% entry tax on the entry of online goods in state of Kerala so it will help the retailers to compete with the online market, as their online prices will rise high due to the addition of entry tax it will give relaxation to retailers.
But on the other side GST will allow free flow of material all over India and it will create problems and will thus support online trading and to stop this, the government will have to put some restrictions on this. And it will also depend on the amount of excise, custom and industrial tax. As entry tax is not present here in Jammu’s landscape, online trading poses a challenge for us.
GST WILL BENEFIT KERALA THE MOST
Being a consumer state, Kerala will benefit the most out of the introduction of the goods and service tax (GST), finance minister T M Thomas Isaac said in Thiruvananthapuram.
“GST would bring big huge benefits to the state,” the minister said. He added that the state commercial taxes department has already started making changes in the IT and other infrastructure facilities in connection with the introduction of GST. The Union government wishes to introduce GST by 2017.
Isaac said that training cannot be limited to officials alone. The new tax regime can be effectively implemented only through discussions and consensus with traders, industry leaders and trading management experts, he said.
The major concern about the introduction of GST is about the tax cap. “When GST replaces all existing taxes, there should be wider consultant what should be the tions on what should be the maximum tax. It shouldn’t become a burden on the consumer and lead to price rise,” he said.
MADHYA PRADESH: THE HEART OF INDIA SPEAKS ON GST
Madhya Pradesh which is otherwise celebrated as the heart of India reacts casually on the burning topic of GST as they are hoping for the removal of entry tax which will in turn help MP’s IT market to grow. The removal of entry tax will encourage Madhya Pradesh’s Channel Partners and Distributor fraternity to export their goods and services to other states without paying any extra taxes and same goes with the import process as well.
Madhya Pradesh Communication and Telecom Association(MPCTA) is one of the associations which takes care of the IT market space in MP and works in close co ordination to help buttress growth in the IT retail sector.
Speaking to DQ Channels on the topic of GST Manish Goyal , President, MPCTA had this to say, “This bill will ease the process as it has the policy of ONE TAX ONE PRICE, this bill help a lot in exporting and importing products which will help to grow business and get product easily without paying some extra taxes. But it will affect the regional distributors as resellers are free to import anything from anywhere so they will purchase from where they get best prices.”
As far as the online market growth is anything to go by, he went on to add, “Online market will become more stronger after GST as their will be no any tax on entry of goods in states. Retail market will be more affected by GST as online will grow more rapidly , they are already giving products at low prices and after the exclusion of GST they will definitely give more discount”.
All said and done, as there is the case of many complications following GST so also it trails along many solutions too, it will widen the market and also levels the variations in if there are any in the market. As there is a Silver Lining like hope that GST will also cut down the import tax from outside India from 35% to that of 18% which would in turn surely help the growth in IT market space across India.
On being quizzed, Mahesh Dubey, Bhoj Information Technology and Office Automation Dealers Association(BITOAA) quipped , “GST will convert multiple taxation into single taxation , as there is a hope on cutting down the taxes on power products like which is 14.5% on UPS and 5% VAT. Earlier during export of products to other states was a double taxation process but after GST it will become Single Taxation, this will also reduce the cost of product. And one of the major issue , The tax return process become easy as only one tax is present their” .
MAHARASHTRA IT PARTNERS REACTS TO ‘ONE NATION, ONE TAX’
Hailing the passage of GST Bill in the Lok Sabha, India Inc said it envisions a possibility of rollout of the indirect tax reform from April 1, ushering in more investments and boosting the country’s economic growth. “With the passage of the bill, it is expected that implementation of GST with effect from April 1, 2017, will become a reality,” CII Director General Chandrajit Banerjee stated.
Once implemented, GST will subsume various taxes including excise, services tax, octroi and other levies, and the proceeds will be shared between the Centre and the states. Under the new regime, goods would be taxed at the point of consumption, instead of the goods being taxed multiple times at different rates. Assocham Secretary General D S Rawat termed it in his own words as what may be called a “big bang reform” and expressed the confidence that the run-up to the real implementation would be smooth.
Maharashtra stands as India’s most industrialised state which contributes 15% to the GDP, However, state is indebted by trillions of Rs. which will create difficulties for State Government to pay the debt as there will be huge revenue loss at early stage. However, according to the Central Government, economy will boost from the new tax system over the years.
DQ Channels looks into what IT partners have to say about the GST bill. Rushabh Shah, President, TAIT quipped “Total tax on software is 15% service tax and 5.5% vat totaling about 21.24% on base rate. This will come down to 18% GST. Software is taxed twice as service tax and VAT. Now it will be single tax. We feel that GST will simplify compliance and will free up resources to concentrate on business expansion. Though, implementation will be done only after things are in place, companies need to start planning for future.”
However, GST bill has a positive side to it, there are some loopholes as well says Sanjeev Pathare, President Computer and Media Dealer Association, Pune. “There will be price parity and advantage is, everyone can sell across India on one rate and business operation will be easier. But if the rate is higher i.e. 18 to 20 percent then that will be taxing to our industry. Secondly, there should be strict rules for credit setoff, unless we will suffer a huge loss.”
Chetan Shah, Vice President, Communications & Events, ASIRT, believes that it will benefit in long terms, “I believe that in the long term, The IT industry pricing might be reduced by 3-5% as currently there is multiple taxation at local, state & centre level. Also the market will open up as inter state business should be easier. Also State Government is happy to go ahead with GST as Maharashtra is a large manufacturing state, and will gain in terms of revenue.”
PUNJAB TALKS ABOUT GST
The Landscape of Punjab which has been celebrated as the Granary of India has Agriculture as its major industry, But the present picture has seen ascending growth in its IT sector as well. Associations such as Punjab Association of Computer Traders (PACT), followed by Jalandhar Computer Dealers Association (JCDA) and Chandigarh Computer Association (CCA) are some of the organizations which are taking care of the IT market scenario in Punjab. No sooner the GST bill has been cleared in both Rajya Sabha and Lok Sabha that it has created a bustle in the Indian market so also in Punjab. The distributors in Punjab are happy with this bill as they think that this bill will bring transparency in the system.
Speaking on this context, Rajiv Khanna, President , Jalandhar Computer Dealers Association (JCDA) stated, “This bill will become very beneficial, as if there is only one tax it levels the cost of product all over the India. But to maintain the records of import and export billing should be mandatory which helps in preventing the tax evasion because if there is no billing this will became an opportunity to tax evaders to increase the margin of their robbery which directly effect the regional distributors who are paying all taxes that is why their product is costly than the local retailers who are not paying taxes and not giving a original bill .” He added , “If government will become successful in stopping these retailers by making compulsory the bill of goods while entering in state it will surely shut down the business of local retailers who cheats while paying taxes .”
This transparency will surely help the market to grow and also ensure that the process of import and export become swifter and easier , as there is no any need to pay taxes again and again. This will also expand the business to the other states as well which in turn is a sign of evident growth and development. For now, the organizations are very positive about GST being cleared in both the houses.
RAJASTHAN’S THOUGHTS ON GST
Speaking on GST Sugreev Singh Ranawat, President, Rajasthan Traders Associations ( RCTA), Jaipur had this to say “Due to GST the interstate business will increase which is less due to some other taxes, manufacturing cost will decrease so it will also low down the prices and it will also avoid the conflicts between different states, which help in encouraging a businessman to works efficiently and it will give positive response. For online market 5.5% of VAT and 5.5% entry tax on entry of goods in Rajasthan is already present which helps retail market to overcome the loss given by online market and also the retail market is competing now days but the entry of GST will convert whole India as a single market which will be good.”
“If GST will come to action we can buy anywhere in India, because till now we cannot purchase from Delhi, Mumbai, Bangalore due to presence of many taxes so importing from other states is not worthy. But when GST will be implemented actually the business of Metro cities will increase. Now we have to purchase within Rajasthan but after GST we can purchase anywhere in India this will decrease the sale of retail market of Rajasthan but automatically increase the sales of metro cities . As a customer point of view it is very effective because of its role in cost reduction but at a dealers point of view it will not affect much. And another thing the resellers or dealers who are not working with proper license or registrations will suffer because the system become more transparent after GST” delineated Basant Mehta, President, Jodhpur Computer Dealers Association (JCDA), Jodhpur.
TAMIL NADU ON GST
K.Senthilnathan President of Computers and Media Society of Madurai (CAMS) on GST : Because of the earlier taxation structure, the material infiltration was not happening from the other states. There was a confined business, there was a static number , what happened in Tamil Nadu was evident which was known to us very clearly, but now there will be a free flow of material from all other states and there will be no tax difference, no conditions implemented because of GST the free flow will be available from Bengaluru or for that matter, any other states en route to Tamil Nadu. We are not able to predict what will happen in Tamil Nadu. So in one way it is good and in one way it is not.
WILL GST HELP THE RETAIL MARKET TO COMPETE WITH THE ONLINE MARKET?
K. Senthilnathan: There are two setups and two dimensions , one is the fraternity of Sub Distributors and the other is retailers . It is not good for Sub Distributors but then again it is good for Retailers. The Distributors
& Sub Distributors will not have any control over the market as the retailers will have more option to choose from. Retailers will choose from the Best price seller distributors from that of other states also. Profit will be there for retailers and not for distributors.
Kuberan, Past president & Co founder secretary of Association of Computer Traders – Trichy( ACT-T) on GST: Definitely it’s a great step by the Government. The Government from its part has cleared it as soon as possible. We are welcoming it but we do not know the procedure and we are closely watching and waiting. Nothing is cleared till now but we want government to fix it on 15% which will be very helpful for the growth of market .
EFFECT ON ONLINE MARKET POST GST?
Kuberan: The Government have to put some restrictions on the online market after the implementation of GST, our expectations is that government will impose some extra taxes on online trading , as online market unfavourably affects the ground level market.
SHA.J, President, Kanyakumari District Computer Dealers Association on GST: In the Kanyakumari district, the IT market is going down owing to some Government policies, the government is issuing free laptops, and other devices which slows down the market. After GST, it will grow if the government considers some small dealers. We are very positive about GST and ready and waiting for it.
Sai Krishna, President, Coimbatore Information Technology Association on GST: I welcome GST, It will ease the process of taxation as there are different taxes in different states as well as variations in their taxes. GST will sort out that issue, taxation should be equal across the country. Their is no entry tax in Tamil Nadu and as we are not willing to pay any double taxes, we are naturally happy that the online market is not doing good nowadays as they were earlier.
UTTARAKHAND’S TRYST WITH GST
Gurmeet Juneja, President ,Uttarakhand IT Traders association on GST: Dehradun is a small place in the state of Uttarakhand, the market is not so big here as compared to the other nearby states. We are positive about GST but we know it will affect the small businesses . Their is a 10% entry tax on online trading in Uttarakhand and let us see what will happen after the implementation of GST.
THE GST STORY SO FAR IN WEST BENGAL...
After the statement given by the West Bengal Finance Minister Amit Mitra on GST, the IT channel community also believes that the uniform goods and service tax is going to benefit small and medium enterprises (SME) the most by way of cutting down bureaucracy and the existing layered tax structure.
According to the situation in West Bengal, SME feeds large industries and the most labour-intensive sector and therefore they should be given simpler passage for doing business. The single tax structure of GST would be ideal platform for them.
Also, West Bengal Chief minister Mamata Banerjee has been supportive of the Goods & Services Tax (GST) Bill. “We have ideological differences with BJP but we will always support on issues that are beneficial to the people. We are supporting GST,” Mamata said after win in the West Bengal assembly elections.
Rajesh Rathi, President, IT Dealers Association of Siliguri (ITDAS), said, “The GST is a good initiative by government of India and NDA, which SMB market will be benefited. Cutting down in taxes would be ideal platform for SMB’s and we are hoping the good margins in our business with it”.
Abhishek Kanoria, Transcon, Director, Transcon Electronics, Kolkata said, “GST implementation will be definitely benefited for the economy of the state as well as the entire IT market in West Bengal. Currently it is hard to say about anything because the implantation process has to take some time but somewhere professionally and personally it will boom the market in WB”.