What Is GST All About?

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."

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."

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."

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."

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."

Concern areas: Pricing & competition

Partners who knew 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."

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