Yeh GST Kya Hai?

New Delhi: While the Indian government is working non-stop to ensure that the proposed implementation of Goods and Service Tax or GST meets its deadline of April 2010, the IT channel partner community at the moment appears to be clueless about what GST is, and how would it impact their business post implementation. The channel partners that we spoke to operate in both metros and upcountry locations, and while most seemed optimistic that the new tax structure would hopefully bring in clarity in business, no one was really sure how it would come about.

Voicing his confusion about the new tax structure, Rajiv Khanna of Computer Touch, Jalandhar said, “Though I have heard about GST, the details are still not very clear. What I can say about it is that going by past experience of when VAT was announced, there is a lot of hype right now, but once the tax is announced, things will fall into place. We will get to know the problems that come with GST only once it is rolled out. Currently, there is lots of confusion about tax on interstate goods. You never know when one of your goods trucks are stopped at a border someplace and asked to produce papers to show whether a particular tax has been paid or not. GST in these situations will no longer be there and state-to-state billing will be made easier.”

Debashish Patra of Bhubaneshwar-based E Mart 4 U confessed, “I haven't heard of GST as yet, so it is too early to comment on the same.” While Sanjay Bagaria of Eeshwar Systems, Guwahati too said, “It is too early to comment on the proposed GST. We have not received any drafts as communication and the structure is not clear to us.”

Adding in a similar vein, Kamal Agarwal of Rajkot-based Ria Computers stated, “Apart from the fact that GST is going to lead to uniformity in taxation, I have no clarity around the new taxation structure. I am waiting for the government to go ahead and implement it. It's only then that I will get clarity on the implications and business benefits we as dealers stand to gain.”
SN Prasad of Patna-based Cygnet Computers shared that he is in a similar quandary. “We are in the dark about GST. Already, we are facing issues with sales tax and service tax on software. If GST can address this dual taxation structure, it would be good.”

Varied theories

What was surprising was that almost all partners that we spoke to, had their own inference to the benefits of drawbacks that GST would bring in. Talking about the same, Dayanidhi of Scott Systems, Vellore said, “This is going to add more confusion to the already-complicated tax paying process and will have a negative impact on business.”

Summing up the situation, Sudharshan Ranganathan of IT@HOME, Chennai said, “It's a wait and watch period right now. More clarity is needed on the technicalities of the taxation.”
“Theoretically, product prices should come down. In the reality sense, we will have to wait and watch. I hope it will be very beneficial to the business community. Cumbersome taxation process will be eliminated, which is a welcome from an administrative point of view,” added Harikrishnan, President, All Kerala Computer Manufacturers and Dealers Association, Cochin.

On the other hand, TK Chandrasekar, President, Erode IT Dealers Association stated, “It is still not clear whether there is going to be a separate department to handle GST. Elimination of confusion over multiple-taxation depends on whether there is going to be a separate entity handling it or not.”

Striking a similar note Mohit Garg, of Aakriti Computers, Ghaziabad commented, “As such I do not have much idea about GST. I have not much thought of it and will analyze the consequences once it gets implemented. From what I can figure, GST is a one time paid tax that a manufacturer has to pay when the material is moved out from the source. So this will enable uniform taxing when the materials are shipped inter-state. There is no worry for the channel partners as it is not going to effect them. The tax will be levied at manufacturer's level and it will help in smooth transportation of the stock.”

Some like Shiv Shankar Singh of Stek Systems, Allahabad were skeptical if it would be implemented in their state at all. “Yes, I have heard about GST, but have not understood its details. I think it will be a good think for the channel if and when it is announced. But most probably it would not be applicable in UP as it is run by Mayawati government.”

Sharing similar thought, Arinjay Jain of Kanchan Computech, Jaipur said, “GST could be beneficial for channel partners but I doubt that it will get implemented in 2010. It may take some time to get levied in the budget system. I cannot see any impact on the business front immediately. It can help the partners in upcountry to grow as they won't have to pay additional taxes and they can expand their business across the states.”

While Sunil Gupta of Delhi-based Alsun Systems welcomed the GST, he was not sure whether it would be implemented by April. “As I understand it, it has been postponed due to the differences between the governments at central and state levels. Once GST comes in to place it will be very beneficial for businessmen. Not only will products have uniform pricing, it will be easier to do interstate dealings. Calculating taxes and understanding them will be simplified. Giving quotes to clients in different cities will also not be a problem as everyone would be following the same tax structure.”

GST is the best

However, not everyone was at sea about the proposed tax. Partners across West India that we spoke to were all rooting for GST, since for them it would probably be freedom from the multiple taxation that they have been campaigning against for years.

When contacted, Umang Mehta, Roop Technology, Mumbai stated, “I am aware that GST is going to be introduced soon and I think it will simplify the business in many ways, as India will turn into one huge single market, like the European markets. Introduction of GST will bring uniformity in the tax issues. GST will allow the distributors and vendors to maintain different forms in the state and central tax issues. I agree that the paper work will increase, but it will also develop transparency among the distributors and vendors.”

Pointing out the flaws in Central Sales Tax (CST) which lead to the idea of GST Kirthi Thakker, President, Ahmedabad Computer Merchants Association said, “There were a lot of discrepancies in CST which forced the implementation of GST in India. When CST was applicable some regions used to change their tax percent by one, four and eight percent, respectively. With the introduction of GST, there will be no confusion in the taxes. GST will definitely increase costing by one percent, if the entire tax structure is changed. I don't think that it will be beneficial, as GST will lower the cost which will not increase the business.”

Expounding on the benefits that partners can derive, Promod Dere of Cyber Peripherals, Aurangabad stated, “The immediate benefit that we will get post the implementation of GST is that there will be clarity in the billing procedure. Apparently, the government of India is planning to implement dual GST. While it is good for states that have higher consumption of goods and services, and lead to better revenue generation for them. The less-developed states will witness fall in collections. However, for dealers like us, it will give us opportunity to expand our business and sell in other states without facing any hassle.”

Joining in the happy chorus of West were some partners in East also. PL Suhasaria of Kolkata-based Caltron said, “As I heard, implementation of the tax will do away with the various taxes that are under scanner. There may be two models of GST which may be implemented, but I do not have details on the structure. As the pricing of commodities will be made uniform as state taxes will be done away with a single structured taxation system, it will bring in growth opportunities for Caltron, as prices will stabilize across the nation.”

Endorsing his views, Pawan Jajodia of Mohit Electronics, Kolkata said, “GST will prove to be beneficial for business. The proposed tax structure will incorporate all taxes, including the much debated service tax on software. I think there will be no effect on the retail price and even if so, it will be marginal, as it is a revision as well as consolidation of the taxes. GST will lead to better billing situation and the incumbencies in the taxing can be removed.”

Down South also, many partners were hoping that GST would be beneficial. Rajinikanth of Microsystems, Coimbatore said, “Single-window tax system is very good and will be convenient. Depending on the taxation policy, the product price may go up or down. In my view, it will enhance business opportunity.”

Karthikeyan of Bloom Electronics, Coimbatore said, “I am yet to put my head into it to understand the technicalities. But from a broad perspective, one positive I clearly see is that it will eliminate the confusion of multiple taxes.”

Concern areas: Pricing & competition

Partners who were in the know about GST were categorical that the new tax regime would increase competition in the market, as it would give all partners the ability to do business across the country. The impact of pricing however is not very clear.
As Prashant Kuncolienkar, President, Goa IT Business Association stated, “While GST will increase uniformity of the tax issues, there would be a likely rise in the price of products. As there was no centralized tax before, so some lump sum would be added to the product, which will result in burden to the customers.”

Commenting about how GST would lead to more competition, Chandresh Vithlani of Solutions India, Pune said, “GST will open up newer opportunities for partners like us, since we can do business sitting in our respective states. On the contrary, it will also lead to stiff competition.”

Sharing his concerns about GST, Talkin Zamindar of Media Infocom, Baruch said, “While on the one hand, GST will lead to a clarity in the taxation structure and hence only one standard form of tax will be applicable on products across the country, its implementation will lead to an imbalance as far as product pricing is concerned. Hence a dealer based in Gujarat for instance will not be able to compete with a dealer in the metro city.”

Reeta Budhay of Nagpur-based Business Algoritham shared, “The advantage of GST will be that there will be no problems in billing and getting material from another state. However, the drawback is that a dealer buying in bulk will enjoy a price advantage compared to a dealer who does not have the financial muscle to buy as much. Hence, the one buying in bulk can push his products in smaller cities and expand his business faster, as he will no longer have to face the complicated tax structure. So while GST will be beneficial for inter-state business, it will kill local players.”

Confusions abound

One thing that is very clear is that every partner has their own understanding of the system. While some welcome the move, they are still skeptical about the increase in paper work. Partners also hope that multiple taxation will go away, but are not sure if the level playing field is what they want. So like partners across country, we also wait and watch about how GST unfolds in channel space.

(With inputs from Amrita Tejasvi, Ruth Samson, Avishek Rakshit, Puja Sharma, Minakshi Shetty, Revathy Ragahavan, N Vasudevan and Shivangi Yadav)