{"id":19208,"date":"2020-11-09T16:07:09","date_gmt":"2020-11-09T10:37:09","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=19208"},"modified":"2021-01-09T17:31:10","modified_gmt":"2021-01-09T12:01:10","slug":"gst-impact-the-it-products-services","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/gst-impact-the-it-products-services\/","title":{"rendered":"A Brief Outlook on GST impact the IT Products &#038; Services"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Goods And Services Tax has already been implemented in our\ncountry and it has affected nearly every sector across the Indian Territory.\nThis includes the well- established and reputed Information Technology sector as\nwell. <\/p>\n\n\n\n<p>Undeniably, Goods &amp; Services Tax has simplified our tax system to a great deal by superseding numerous indirect taxes with a standalone tax system to overcome the cascading of taxes. It will be interesting to know how GST impact IT products and services.&nbsp;<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/gst-impact-the-it-products-services\/#GST_Impact_on_the_IT_Products_Services\" >GST Impact on the IT Products &amp; Services<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/gst-impact-the-it-products-services\/#Place_of_Supply_in_the_Event_of_a_Single_Contract\" >Place of Supply in the Event of a Single Contract<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/gst-impact-the-it-products-services\/#GST_Rate_for_IT_ProductsServices\" >GST Rate for IT Products\/Services<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/gst-impact-the-it-products-services\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"GST_Impact_on_the_IT_Products_Services\"><\/span>GST Impact on the IT Products &amp; Services<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"696\" height=\"584\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/11\/image-31.png\" alt=\"GST Impact on the IT Products\" class=\"wp-image-19209\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/11\/image-31.png 696w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/11\/image-31-300x252.png 300w\" sizes=\"(max-width: 696px) 100vw, 696px\" \/><\/figure><\/div>\n\n\n\n<p>The following significant changes have been witnessed in the tax rates for the IT products and services.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Increased tax rate on Printer and Fax Machine<\/h3>\n\n\n\n<p> Under GST law, the GST will be imposed on the IT product such as a printer, fax machine, and cartridges @ 28% compared to the previous 18% tax rate.&nbsp; <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Increased Tax Rate on Software Services <\/h3>\n\n\n\n<p>The software services will attract 18% GST in contrast to the earlier rate which was capped at 15%. The tax rate on electronic packaged software shall lure 18% of GST.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Increase the Infrastructure Cost<\/h3>\n\n\n\n<p>The IT firms have to sync their software and hardware to calibrate their system according to GST. This might impact the infrastructure cost as well as the business ability to expand current facilities.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">ITC for IT Traders<\/h3>\n\n\n\n<p>There is another bright aspect of GST which is known as\nInput tax credit (ITC) which shall be accessible to IT traders.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Increased the Operating Cost<\/h3>\n\n\n\n<p>Another significant change is for the accounting service\nproviders who now requires to upgrade their ERP system under GST or create a\nnew program like Gen GST. Apparently, this will increase the operating cost of\nthe accounting service providers.&nbsp; <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Increased Compliance Cost <\/h3>\n\n\n\n<p>The preceding taxation system facilitates the single point\nof taxation i.e. central service tax. But, under the GST regime, there are 111 taxation points.\nNow the firms have to address the state as well as the center individually,\nwhich will increase the cost of compliance.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Supply of ERP will be Continuous<\/h3>\n\n\n\n<p>In the preceding system, the ERP used to serves the\nlong-terms contract which was expanded over the years, and service tax was\nlevied accordingly. In the GST regime, the supply of ERP will be periodic or\ncontinuous and the tax shall be imposed accordingly.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Ensure growth for Accounting Software Developers <\/h3>\n\n\n\n<p>GST has a positive impact on the accounting software\ndeveloper firms across the country. Many entities have already unveiled their\nGST program to help CAs and companies get in line with the new form of the tax\nsystem.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Improve the Investment Capabilities <\/h3>\n\n\n\n<p>Cascading of taxes has been eliminated after the advent of\nGST. That means IT companies are no longer required to address various tax\nliabilities for supplies of their goods and services. GST regime allows\ntaxpayers to confront the aggregated tax amount only. This will help the\ncompanies to improve their investment capability.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">No GST for BPOs or Software Development Firms <\/h3>\n\n\n\n<p>As per the GST framework, IT services like consultancy,\nsoftware development, and BPO services would not attract any taxes under GST\nand companies will be able to reap credits on the input tax paid.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">More Tax Liabilities for Freelancers<\/h3>\n\n\n\n<p>The freelancers engaged with the selling of IT services are\nnow required to confront 18% of the tax rate under GST, which was previously\ncapped at 15%. Bloggers with yearly income less than 20 lakh need not register\nfor GST.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">TCS Collection for E-commerce <\/h3>\n\n\n\n<p>In the GST regime, all the online sellers have to avail of <a href=\"https:\/\/corpbiz.io\/gst-registration\"><strong>GST registration <\/strong><\/a>and pay taxes, regardless of their yearly turnover. E-commerce firms would not attract any benefits from the <a href=\"https:\/\/corpbiz.io\/learning\/brief-gst-composition-scheme\/\"><strong>GST composition scheme<\/strong><\/a>. The eCommerce platforms are liable for the collection of TCS from their sellers and pay it to the government, such activities attract the input tax credit.\u00a0<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Place_of_Supply_in_the_Event_of_a_Single_Contract\"><\/span>Place of Supply in the Event of a Single Contract<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In past, IT service providers handle the taxation-related\nactivities from one location i.e. the main office of the business. Under Goods\nand Services Tax, a provision related to \u201cplace of supply\u201d was introduced,\nwhich brings the requirement of various invoices and billing in the event of a\nsingle contract service where delivery is executing from various branches of\nthe same activity. For that, the IT firm has to register for those states as\nwell as the region where the customer resides.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Multi-Point Taxation<\/h3>\n\n\n\n<p>Currently, there are 111 taxation points that a taxpayer needs to access while addressing the process of <a href=\"https:\/\/corpbiz.io\/gst-return-filing\"><strong>GST return filing<\/strong><\/a>. GST regime consolidates three tax points i.e. central GST, inter-state GST, and state GST. Now, these tax points are supposed to be multiplied by 37 jurisdictions, which make the total 111. This sum is referred to as a taxation point which an IT company needs to address to clear through filing the GST.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"GST_Rate_for_IT_ProductsServices\"><\/span>GST Rate for IT Products\/Services<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The tax rates for the IT sector have been increasing gradually\nsince the day of GST implementation. However, the cascading effect of taxes and\nvarious tax systems has been completely eliminated. Now customers need not\naddress multiple taxes (service tax + VAT + excise duty) while paying for IT\nsoftware services. Instead, they have to pay a single GST tax, which is roughly\nequivalent to the sum of the aforesaid taxes.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The E-commerce marketplace is also encountering significant changes in the new <strong>GST tax<\/strong><sup><a href=\"https:\/\/www.gst.gov.in\/\"><strong>[1]<\/strong><\/a><\/sup> framework. The GST provision directs e-commerce platforms to deduct TDS (Tax collection at source) from the sellers, and then deposit to the government. Therefore; every seller has to register &amp; file a return via online mode if they intend to claim the credit on TCS paid. This adversely impacts their cash flow and investment capability.  <\/p>\n\n\n\n<p>This may disrupt the growth of the industry and can also enforce the sellers to withdraw from the online platform.&nbsp;Connect with <a href=\"https:\/\/corpbiz.io\/\"><strong>CorpBiz<\/strong><\/a>\u2019s professional to get more detail on GST Impact on IT products and services.  <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/gst-impact-on-the-agricultural-sector\/\">An Insightful Explanation on GST Impact on the Agricultural Sector\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Goods And Services Tax has already been implemented in our country and it has affected nearly every sector across the Indian Territory. This includes the well- established and reputed Information Technology sector as well. Undeniably, Goods &amp; Services Tax has simplified our tax system to a great deal by superseding numerous indirect taxes with a [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":19213,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[1195],"acf":{"service_id":"334"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":5272,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/19208"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=19208"}],"version-history":[{"count":8,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/19208\/revisions"}],"predecessor-version":[{"id":23863,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/19208\/revisions\/23863"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/19213"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=19208"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=19208"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=19208"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}