A GST or Goods and Service Tax can be taxing for the people because of the service charges added to each and every goods and service. With GST being implied on everything the IT sector cannot expect to remain out of its reach. A significant change is to take place with a totally different tax regime. This will make the system simple, especially for the ones in the IT sector. Let’s learn the ways by which GST can impact a business:
A business irrespective of being large or small size is in a trial always to get their ERP and accounting systems in sync. This will lead to an increase in the infrastructure cost and also change the business systems. Some companies rather all companies have set up their own technical experts, finance teams, and an expert from their respective GST software vendor.
Software Developers and Sellers
All the fintech companies are trying to develop the GST software. It is expected that GST will impact the companies by opening a huge market for them. So, the more demand for the GST software would mean boosting the potentials of the software developers.
There are several freelancers who are found to offer app development, designing and website building services. With the introduction of GST, they are going to pay a little more of the tax that they used to pay earlier. The bloggers are feeling confused if they would also have to pay some taxes as earlier they were not taxable. They need to find out the answer from the concerned authorizes.
Export of Services
An important source of foreign income in any country is through the IT sector. With GST the export taxes will nearly get removed. The economics say that with the introduction of GST there might be import taxes but the money will be refunded later. Interestingly the place of supply will play a major role. The services that might be included in this category are the BPO operations, software development, software consultancy, software support and others.
Redesigning the Business Software
If GST is introduced then the companies have to get their ERP software redesigned or updated by professional IT experts as per the GST rules. They might also consider switching to specialized GST software which might be launched in the market.
Increase Documentation Workload
As the administrative costs are expected to increase the Tax Collection at Source (TCS) will have to increase the documentation workload for the firms. Small sellers are expected to see cash flow issues. They may ask for a refund on the tax paid on inputs which the ecommerce platforms may not be able to support. So, there will be a significant increase in the compliance burden.
The law regarding GST includes several points of taxation in the IT sector. This means that the companies under this sector have to get themselves registered with all the points that might be mentioned in the laws in order to continue their operation. This will be as per all the states they are offering services or having customers. All billing and accounting has to be done from a central location.
The IT companies get a scope of good news through ITC. Earlier the traders could not avail the service tax paid on the software and computers. With GST that will become possible. The taxes paid for the hardware can be adjusted against small parts repair and service tax.
As the tax rates will elevate, there will be a significant increase in the cost of the services. The end customers will be affected the most with it. The VAT that comes under the state government and the service tax payable to the central government will no more be into existence. Even the excise duty might also get excluded. Only one tax, and that is, the GST will remain applicable. So, the average tax is going to get reduced leading to lesser cost for the IT services.
The IT companies are overall going to experience an ease in carrying forward the day to day businesses. It will be better to go through the Government legislation in order to understand the concept in a proper way. This will help them to recognize the challenges and overcome them as quickly as possible.