“GST law has entrapped the services sector into a maze of procedural compliances”

 Sanjeev Arora

Chief Executive - Digital Services

WeP Solutions

“The unveiling of GST law is anticipated to have profound effect on different sectors. The impact can be:-

(a) Monetary impact by way of higher or lower incidence of tax and consequential impact on demand;

(b) Increased procedural compliance; and

(c) Transformative impact

Much of the manufacturing and trading segment has to contend with either higher or lower incidence of tax. Consequent impact on demand is anticipated in the short to medium term. On the positive side, the layer within the segment that was reluctant or hesitant to embrace Information Technology can no longer continue with intransigence. Many of the small scales units and medium scale retail units fall within this category. IT products that cater to this segment can look forward to happier times.

GST law in its present shape has entrapped the services sector into a maze of procedural compliances. In the pre-GST era, firms operating in the services landscape could be registered centrally and operate seamlessly in India. This is set to change quite drastically.  Firms are required to be registered in multiple States. So firms in this segment require IT products that help them to meet their increased procedural compliance requirements.

The third impact is quite transformative in certain sectors like for example a manufacturing company would no longer be required to have warehouses in different states. Rather, it can have a nodal warehouse either near its factory or its primary market and cater to the country wide requirement. One can look forward to paradigm shift in the way firms operate their logistics. We need IT products that ease the pain of such radical changes.

SMEs need to adapt to the changed environment with a positive mindset. Any change is bound to throw up opportunities and the ones that are enterprising enough to capture them, would flourish.

It is early days to make definitive judgment on pricing of the products under the new tax regime. Nevertheless, the downstream of value chain that was not exposed to value added taxation till now, in due course of time will gain confidence on the availability of input tax credit and hence will be more willing to pass on the benefit of reduced incidence of tax.

Another reason for this impression gaining ground is the peculiar nature of IT products. Some IT products display features of entertainment industry, household consumer durables etc and have been subject to higher rate of GST. Dual use products are faced with clarity or rather lack of it with regard to rates of taxes and this is another reason for this impression.”