Looks like New GST Bill will be more Taxing for Tech Cos

IAMAI says a `forward looking' Bill that is supposed to modernise Indian governance fails to recognise the Internet and digital economy in India

The new Goods and Services Tax (GST) Bill, likely to be tabled in the coming monsoon session of Parliament, seems to have “pushed the internet economy under the bus“, said industry body Internet and Mobile Association of India.

The new GST Bill is a missed opportunity to set up a futuristic regulatory regime with focus on the key sectors that are expected to drive growth in the country , IAMAI said on Monday . At the heart of the issue is that the Bill's extant Service Tax Profile recognises services like advertising and online information services, online information and database access, internet telecommunication services and telecommunication services as separate service categories.

This means that services provided by companies such as Airtel Vodafone, Google, Facebook, WhatsApp or a Flipkart are identified as the same in the Bill.

“The new GST Bill springs an unpleasant surprise: a `forward looking' Bill that is supposed to modernise Indian governance fails to recognise the Internet and digital economy in India. It is ironic that while on one hand the Government is promoting Digital India and Start-up India initiatives, the GST seeks to turn the clock back by decades,“ IAMAI said.

IAMAI counts companies such as Google, Twitter, LinkedIn and Microsoft as its members in India.

Under the new GST Bill, electronic mail, voice mail, data services, audio text services, video text services, radio paging and cellular mobile telephone services have been clubbed under `telecommunication services'.

“Clubbing all the sectors under telecommunication services reflects a poor understanding of technology , and a wilful renouncement of the existence of these sectors in India. This renouncement is compounded fur ther in the section listing activities to be treated as `supply of service' and also the new `Place of Supply of Goods andor Services' section under the new Bill,“ said IAMAI. Recognising the category of services is key in terms of determining tax liabilities, regulatory compliance and so on. For example, online marketplaces could successfully contest claims of VAT payment by positing their services as digital platforms and not retailers.

“The transition to the new GST regime from the existing tax structure is going to be a major challenge for all sectors of the economy (and the regulators as well) and such discrepancies will only add to the woe of the internet sector,“ said IAMAI.

The Economic Times New Delhi, 28th June 2016