GST Impact on IT and E-Commerce Sector

The GST (Goods and Services Tax) regime is all set to unify and simplify the Indian taxation structure will be implemented from July 1, 2017. GST will subsume 17 different taxes, 33 different cesses and six surcharges. The Government has already announced the taxation rates on various categories. It is going to be a four-tier taxation structure – 5, 12, 18 and 28 percent, with cess on a few items.

The impact of GST on IT sector is a burning issue these days. With GST coming into play, your mobile bills, prepaid recharges, bank transaction charges and various other services that attract Service Tax will go up. As per the revised taxation structure, you will be charged at the rate of 18 percent of the taxable amount.

With the service tax on telecom sector going up to 18 percent from the existing 15 percent, you will have to add some more amount to your telephone bills. For a telephone bill of Rs. 100, you will need pay ₹ 3 more as taxes. Similarly, for a prepaid/DTH recharge of ₹ 100, you will get ₹ 82 instead of ₹ 85.

This is also going to have an impact on ‘Make In India’ initiative. Phones manufactured in India needs to pay around 8 percent tax. With GST, these phones will have to pay 12 percent taxes. Phones that were imported will now get cheaper. Presently, they pay up to 27 percent taxes and duties. With GST, the imported phones are also going to attract 12 percent taxes. This may Hurt the ‘Make In India’ scheme as companies will consider manufacturing their devices outside India. While IT products are going to be taxed at 18 percent GST.

Under GST regime, orders placed via E-commerce websites will be delivered faster as the check-posts at state borders will be withdrawn. E-commerce companies will collect 1% TCS (Tax Collected at Source) while paying to the sellers.

UPDATE (June, 30)

1. The government has announced the deferment of TCS provisions under GST Regime.
2. TRAI recommends 5% GST for telecom services.