GST: Unity in Di­ver­sity?

Dif­fer­ent states have con­tra­dic­tory views on GST. Will In­dia have a smooth uni­form tax regime?

DQ Channels - - Front page - MAYANK SHISHODIA ([email protected]­ber­me­ ANUSHRUTI SINGH [email protected]­ber­me­ ANKIT PARASHAR ([email protected]­ber­me­

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?


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” .


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.


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 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” .


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.”


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.


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.


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.


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 .


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.


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.


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”.

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