MAIT takes up backend issue with govt

New Delhi: The problem of service tax on backend incentives is slowly spreading its claws across the country and channel partners are gearing themselves to safeguard their businesses from it. As IT associations across the country gain steam in this general direction, Manufactures Association for Information Technology (MAIT) has also joined the crusade. “We have sent our representative to the government to discuss the issue. We are aiming to give detailed explanation to the government on backend rebates. The government is asking for service tax, saying that if the retailer or reseller is getting benefits from selling a product, then it is a commission linked to sale of a particular vendor and service tax is applicable in that condition,” explained Vinnie Mehta, Executive Director, MAIT.

Mehta further said that MAIT is trying to convince the government that retailers get commission when they pick the material from the distributor, no matter whether they sell it or not, and hence it is not directly related to sales therefore, so service tax cannot be applied in this case.

When inquired with Mehta about the expected decision of the government as the channel associations are waiting for the government’s statement, he commented, “We should not jump to conclusions but wait till the government comes up with a decision.”

On the steps that MAIT would take to safeguard the interest of the channel associations, Mehta said, “Till now, only Delhi-based Computer Media Dealers Association (CMDA) has approached MAIT seeking relief from tax on backends. No other association has spoken to us regarding the matter.”