GST in its present form is a restrictive proposal: IAMAI


The draft GST Bill offered a host of expectations to the internet industry as the ‘one tax, one market’ principal of GST is in perfect accordance with the ‘one country, one market’ business practice of the digital industry. The GST was expected to help ease of doing business in India, allow free-play to market dynamics, and allow deeper penetration of these services. Unfortunately, the draft GST Bill disappoints by creating more challenges than it solves for the industry, IAMAI said in a statement.

According to IAMAI, there are multiple loopholes in the new draft GST bill. Some of these are listed below:

Problem of definition

The draft New GST Bill fails to recognise the digital industry when it clubs diverse sectors under ‘telecommunications’. Failure to understand the technology sector leads to other definitional problems, like failing to understand the difference of ‘digital intermediaries’ from ‘commission agents’ or a ‘broker’.

Burden of Principal

Misinterpretation of the internet sectors’ activity leads to onerous ‘Burdens of Principals’ imposed on them, given the internet services companies  are now recognised as agents of the principals using their respective digital platforms. The threats to safe-harbour provisions or the burden of TCS for e-commerce are wrongfully imposed on the sector under GST.

Lopsided burden of compliance

Tax collected at source is imposed unilaterally on online transaction and the registration process denies threshold relaxations for anyone engaging in e-commerce activities, while their offline counterparts are absolved of such burdens. This could well spell doom for startups/SMEs planning to get on-board.

Services sectors such as IT/ITES, ICT, Internet economy has been fuelling India’s growth over the last few decades and has helped India attain a global identity. Disruptive innovations will lead to newer service categories like Saas and IoT to evolve, and Digital India or Start-up India are initiatives to ensure India stays ahead of the curve in the global market.

To achieve all this Government support is critical by way of light-touch regulations that encourage permission-less innovation. The GST in its present form is a restrictive proposal that can derail the aspirations of the digital industry in India.

IAMAI appeals to the authorities to engage in stakeholders consultations on the GST to help devise a progressive taxation framework that will help usher India into the digital age of the future.

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