GST – Impact & Challenges IT/ITeS Sector

Indian IT/ITeS Industry - Background Size – Rs. 10 lakh Crs (USD 160 Billion)* Exports- Rs. 7 Lakh Crs ( USD 110 Billion)* Countries : 670 offshore delivery centers in 78 Countries* Employment* : 37 lakh direct jobs 63 lakh indirect jobs , 1/3 Women workforce Largest contributor to the forex earning of the country * For FY 2015-16 reported by Nasscom

GST Advantage PAN India Common Rules, rates and procedures Input credits available for States & Central tax paid Except: Rent a cab, construction related, employee welfare and free supply Certainty in applicable indirect taxes software licenses deemed to be service- entry 5 (c),(d) & (f) of schedule II of CGST Act. Zero rating for exports and SEZ units. No tax on exports/ supply to SEZ under bond/LUT u/s 8 (1) of IGST Act Technology based tax compliance system. GSTN, GSPs, ASPs

GST downside Increase in effective rate of tax for domestic business by 3% Additional working capital requirement Output, Reverse charge payment in cash & non availability of credits for certain supplies Multiple registration- additional compliance cost State-wise registrations, separate registrations for SEZ units/developer STPs/EOUs are no more attractive Only BCD exempt on allowed procurement Export and SEZ supply zero rated only when made under Bond or LUT Full input credits with no tax payable on output U/s 8 (1) of IGST Act & Rule 96A of the CGST Rules Exporter to bring money in convertible foreign exchange within 12 months else pay IGST Rule 96A of the CGST Rules Treatment for amount received for breach of contract On Notice pay recovery, breach of bond GST payable.

GST challenges Complex procedure to avail Input credits – mismatch, capital goods Rule 36 – credit against tax invoice, bill of entry, invoice for RCM paid, Rule 43 common capital goods and Rule 69 Mismatch of credits Transitional issues: tax on stock, invoices of received post GST carrying old taxes, old credit notes, GSTN portal initial issues. Increase in Refunds amounts No zero rating for STPs, EOUs, No deemed exports, increase in rate of tax by 3% Identification of and compliance for purchases from unregistered persons Petty expenses, RCM on reimbursements claimed by employees Self invoicing and payment voucher Classification, HSN, tax rates Cross boarder transactions Branch to head office and vice-versa, exports & liability under reverse charge Treatment for services provided to employees Health insurance, transportation services etc where recoveries are made from the employees

E-Commerce Sector

Indian E-commerce Sector Very promising upcoming sector – USD 30 Billion in 2016 expected to touch USD 100 Billion in 2020* Large players like Amazon, Flipkart, Snapdeal, Tata CLiQ in retail, Services aggregators like Ola, Uber, Airbnb, OyO Rooms. Online digital services platforms: Coursera, iON digital Hub etc Attracting large foreign investment Startups & young entrepreneurs Innovative ideas, identifying customer pain points, use of technology *IBEF report 2017

Special compliances for ecommerce operators Compliance obligations for E-Commerce operators Section 52-Tax Collected at Source, compliance –GSTR-8, non-resident operators to take registration, TCS issue on Cash on Delivery transactions For notified Services provided ecommerce operator is required to pay tax on services supplied through the online platform Section 9 (5) Compulsory registration for persons supplying goods and services on e-commerce platform Section 24 (ix) Tax on Goods Returns

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