GST, tax, new tech: Channels’ take on Budget 2018

While the reduction in corporate IT rate for MSMEs is a welcome move, Budget 2018 is missing the bigger picture, reveal tech channels in India.

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“Introduction of GST has made the indirect tax system simpler,” said Finance Minister Arun Jaitley while presenting the Union Budget 2018. GST implementation might have been successful despite the initial hiccups, but it remains the elephant in the room for the tech channel community in India. 

Channel partners have voiced concern about the uneven tax structure under the new tax regime. Industry body MAIT has also requested more clarity for tax slabs, as under the current system different components are subjected to different taxes. Channels had also expected the government to roll out weighted tax benefits for R&D activities, which did not happen.

Related: What channel partners seek from Union Budget 2018

Is the income tax reduction from 30 percent to 25 percent for MSMEs with a turnover of upto Rs 250 crore enough to meet IT channels’ expectations? In an interaction with ChannelWorld India, voices from the partner community elaborate on what went right and what went south in Union Budget 2018.

“The corporate tax cut is a welcome change. But keeping inflation in mind and the way the market is behaving, it would have been better for MSMEs if the reduction had been more.”

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        Jitesh Chauhan, MD, Rubik Infotech

 

GST woes:

Although the government is looking at GST as a remarkable success, tech channels do not share the same confidence. Jayanth Gojer, COO at Vitage Systems says that the implementation of the GST was not ideal and well thought through.

“Having so many tax slabs defeats the main purpose of ease of taxation. In addition, the frequent changes are not only confusing but also inconvenient,” he adds.

“A copier printer today falls under the 28 percent slab and a normal printer under the 18 percent slab. Atleast all product lines should be uniformly taxed otherwise it’s a big challenge.

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          Rajeev Mehta, CEO, Zest Systems

Echoing the concern around GST, Rajeev Mehta, CEO at Zest Systems, says that uniformity is very important. “A copier printer today falls under the 28 percent slab and a normal printer under the 18 percent slab. At least all product lines should be uniformly taxed otherwise it’s a big challenge,” he explains.

Corporate tax relief

In Budget 2015-16, Arun Jaitley had promised to cut corporate tax rate to flat 25 percent, which is still not implemented. In Union Budget 2018, Jaitley announced that the corporate income tax rate will be cut to 25 percent for companies with turnover of upto Rs 250 crore. According to the Finance Minister, this will benefit 99 percent of all companies that file taxes, with mini, micro, small and medium enterprises being clear winners.

Gojer opines that this is a good move as a start. “I hope in future this will lay the trend for reduction in corporate income tax. Since the most impacted from a finance point of view are normally the MSMEs, this move has sent the right signals to the industry,” he adds.

“R&D in India has always been an area without much focus and incentive. If we, as a country, are to move forward as a sustainable economy we need to increase spends at all levels – the government and the corporate.”

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Jayanth Gojer, COO, Vitage Systems

Jitesh Chauhan, MD at Rubik Infotech says the budget has not met expectations in terms of growth. “The corporate tax cut is a welcome change. But keeping inflation in mind and the way the market is behaving, it would have been better for MSMEs if the reduction had been more,” he says.

The tech push

Although Jaitley announced that the NITI Aayog will set up a national program on artificial intelligence (AI) and Centres of excellence (CoE) will be set up for robotics, AI, quantum computing, IoT etc, partners are skeptical about this move. “If implemented properly,  it's a welcome change. But we will have to wait and see how it is implemented and what the idea behind it is. It is not clear what money they are going to spend, how they are going to spend it and what tech they will spend it on,” says Chauhan.

The channel community had also included weighted tax benefits for R&D activities in its wishlist for Budget 2018. But this seems to be missing from the Union Budget.

Gojer elaborates that R&D in India has always been an area without much focus and incentive. “If we, as a country, are to move forward as a sustainable economy we need to increase spends at all levels – the government and the corporate,” he adds.

Will the corporate tax cut and setting up of CoEs prove to be a relief for tech OEMs and channels? Only time will tell. However, the pressing issue at hand is the GST structure, and partners are not happy with what has unfolded since its implementation.