GOODS AND SERVICES TAX
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Goods and Services Tax
With GST (Goods and Services) Tax being imposed, other taxes have already been lifted to a single taxation system. GST in India has been divided between the state and the central which helps the taxation system be easier and simpler. There is a lot of work on a company’s side which needs to be done in terms of training their employees, re-working on their invoices and working in compliance with the new regulation. However, the IT sector with services such as software development, mobile app development, website design and more, is one of the major sectors that are likely to be impacted. With the intention of safeguarding the financial independence of the States and the Centre, the government has proposed. The GST constitutional amendment bill passage would now pave way for the enactment of the GST law at the Center and the states. As details are worked out in the next few months, it will have a positive impact for the country in the long term. The draft GST model law, currently in public domain, requires close collaboration between Industry and Government to ensure that the GST regime lives up to the expectations, including not only maintaining but enhancing the competitiveness of technology products, services and the internet sector.
How CronJ Benefits
CronJ can benefit you in taking distribution network decisions post implementation of the GST
Centralization or Decentralization? We can decode this for you? Whether or not you still your warehouses across different state or a central warehouse can suffice your requirement.
We can assist you redesign or optimize your distribution network so as to minimize the overall supply chain cost.
Milk Run or Cross Docking or Direct Supply to Distribution center? We know what’s right for you?
Supplier network optimization
We can help you operate at an optimal tradeoff between Inventory carrying cost and Transportation cost.
Should you change your vehicle scheduling? We have the algorithm.
Tax efficiency or Operational efficiency? We will help you to get to best of both the worlds.
CRONJ will help you in technology up gradation, logistics optimization and throughput enhancement.
We can help you to integrate your old financial system with GST compliant solutions
Efficient product plant mapping. We can help you take advantage of economies of scale.
Includes multiple levies
Simplifies taxation of electronic downloads
Robust technology framework for execution bringing in transparency
Requirements for time bound processes
Simple, effective and transparent indirect tax regime is extensively expected to accelerate overall growth of GDP in the country.
The impact of GST on the software companies
GST will take out several duties for IT organizations. It will similarly permit further entrance of computerized administrations.
Taxation on manufactured stock will rise from existing 14-15% to 18%, which indicates the cost of hardware from cell phones to portable PCs will also rise.
GST may make many tax assessment focuses for IT organizations.
Specialists trust that GST may increment regulatory expenses for online business organizations.
As the Taxation Calculation Source (TCS) rules in the GST administration will build organization, documentation workload for online business firms and push up expenses
Sectors are going to be affected by the implementation of GST
With the Revenue Neutral Rate recommended at 14 to 15.5% and the standard rate suggested at 17-18%, IT services will definitely get taxed at a higher rate than the prevailing Service Tax rate of 14.5%. Thus prima-facie it appears that cost of IT services would jump, especially for end customers who do not claim input credit. In case of packaged software sales, in most of the states both VAT (~ 5%) and Service Tax (14.5%) is applied leading to dual taxation with effective rate of tax touching 20% due to dual tax and tax-on-tax effect.
Elimination of cascading effect
IT service providers, under GST would be able to set-off input GST on purchasing of Goods required for setting up the necessary IT infrastructure with their GST output liabilities. Thus, in the long-run these benefits would eventually flow to end users as IT service providers would lower their costs. Under GST this dual taxation and cascading effect would reduce ominously and the welfares could grow to end user in the form of lower prices.
Business Process Change
GST is a destination based consumption tax, i.e. the tax revenue would accumulate to the state government where the services are consumed. Presently most IT service companies are registered only with the Central Service Tax authorities and all accounting and billing is done from a centralized location. IT service providers would also be required to bifurcate services and bill the customer state-wise. That is, determination of point of supply using location based proxies or other mechanism becomes crucial. This is more unwieldy for IT service provider whose customers have pan-India presence. This added complexities related to distribution of GST credits (for supplies procured centrally) to state wise branches.
Several times, customization is also not promising in older software due to many reasons like language, coding, or the company that had developed it, shuts down. In these cases also the company will face difficulties with their software as it will be an extra cost to get a development done on it for GST computation.
The older systems are also challenging to be scaled to include GST in them. They are not supportive in a ‘Plug and Play’ environment, wherein they can have dissimilar software for GST plugged into their system and produce a common tax data and compute effortlessly.
Most systems are old and cannot handle more than standard accounting for the company. The benefits with this kind of software are that, they are small and can handle the smaller transactions easily and are appropriate for them. While they may prove to be economical, they are not adaptable and cannot change with the current environment. Many times, their code is not there or the company that initially built the system, themselves have shut. In such a case, it will be challenging to adapt the software to the changing times for moving beyond Excise, VAT to GST.
Single Location Supplier
When IT service providers is located at one place, and provide services from that particular place. The place can be registered under GST. That registered place shall be treated as location of the supplier. From that place, all taxes can be paid based on whether recipient is located within state (CGST plus SGST) or outside state (IGST). All inputs shall be received at that place and input tax credit shall be taken.
Supply from single location but development at different places
At times it happens that although outward supply is made from a single place, the service provider has different development centers at different places. These different development centers at several locations can be also be registered. At the end of the month these development centers can issue an invoice to the principal place based on month wise costing data of development center. This way all input tax credit received at various locations can be transferred to the principal center. These credits can be used to pay GST on outward supplies.
CronJ has the solutions and technology to help to make a smooth transition to GST. We provide supply chain solutions to take informed decisions so as to take right business decisions.