Indian GST risks for tech

Thu 18th Aug 2016

This month, the Indian Parliament approved the constitutional amendment to enable the implementation of a new Goods & Services Tax (GST).

GST will replace a plethora of indirect taxes, including CENVAT, VAT and Service Tax. This includes the withdrawal of multiple taxation of the same movement of goods across internal state borders. It is anticipated that the streamling of India’s consumption tax regime could lead to a 2% rise in GDP.

However, the reform will have some ‘losers’, particularly in the service and hi-tech industry. Issues include:

  • Rise in tax as 15% Service Tax is replaced by GST by 18% or more
  • Obligation for hi-tech service firms providing services in any of the 29 states to register for GST locally
  • Varying invoicing requirements in each state
  • Managing GST reverse charge rules on service imports and exports
  • Transfer pricing issues on intra-group supplies of services across state borders