Amongst all the speculation, confrontation and haste, the much awaited indirect tax reform have been launched in India and has started settling. While a part of the industry has adapted their business to the new tax regime, some are still coping with the sudden change in paradigm, grappling with varied interpretations, and learning to unlearn the erst while indirect tax system. While Goods and Services Tax (GST) intends to benefit the business at large by providing features like unified tax, free flow of goods and credit, and others, it has its own challenges when tested in different businesses. This article attempts to briefly touch upon the complexities and challenges for technology sector under GST law and gage whether the present form of GST has achieved its objective in entirety.

Lack of Parity in Software Supply
Supply of software has always been the subject matter of litigation due to difference in the rate of tax when software is provided as goods or as services. Further, GST intended to bring an end to such controversy by providing equal rate of GST for supply of software, whether as goods or services. However, there appears to be some lacunae when the software are supplied by way of paper licese or embaded in a media, viz. CD or other storage devices. In case of supply of software by way of paper license, the software are purchased and downloaded online and paper licenses (with activation key) are sent separately to the customer. Under GST paper licenses may be regarded as a ‘document of title’ which attract IGST (on imports) at the rate of 12 percent. However, supply of software on a media is subject to IGST at the rate of 18 percent. Certainly their exist no parity in terms of rates of GST.

GST poses a similar challenge for software businesses with respect to determination of tax liability when the software is provided on a media vis-à-vis when its provided through electronic down loads. The FAQs issued by the Government clarify that supply of pre developed software on any media or made available through encryption keys would be regarded as supply of goods. However, download of software is regarded as online information and database access or retrieval services for the purpose of GST. Further, rules for determining the ‘place of supply’ for supply of software as goods and

electronic download of software would also differ depending upon the channel of supply of software. Thus, GST treatment for the supply of software may differ based on the supply chain adopted by the supplier.

GST poses a similar challenge for software businesses with respect to determination of tax liability when the software is provided on a media vis-à-vis when its provided through electronic downloads

Cloud Service Confusion
GST treatment in respect of cloud service providers would also differ based on the nature of cloud services being provided. ‘Online Information and Database Access or Reitrival’ (OIDAR) services intends to cover all services whose delivery is mediated through information technology over the internet and specifically includes cloud services. How ever, provision of cloud service by way of Infrastructure as a Service (IaaS) where private cloud infrastructure is created may have a different treatment under GST.

Challenges for e-Commerce Operators
GST also poses fresh challenge for e-Commerce operators located abroad and enaged in providing platform for certain specified services (i.e. transport of passengers vide radio taxi, motorcab, maxicab and motorcycle and accommodation in hotels, inns, guest houses, clubs, campsites, and others). It would be difficult for these foreign companies to manage and control internet based transaction / bookings in India and discharge GST obligations. Further, a start-up (in goods domain selling through online portal) trying to establish its business is burdened with heavy compliance under GST due to mandatory registration requirement. This is not in tune with the objective of the government of providing a threashold limit or to promote entrepreneourship in India.

Fate of State Incentives for Tech Businesses
Lastly, with the introduction of GST, fate of state incentives/Government subsidies to tech companies is under un-certainity. For instance, various states provides incentives to tech companies by way of providing tax holidays, deferment schemes, subsidies, and more. Under GST, the fate of benefits granted in erst while regime which were supposed to continue after implementation of GST is unclear.

Conclusion
While GST poses fresh challenges for the tech companies, startups and foreign e-Commerce operators as stated above, it also settles down some basic questions in the erstwhile indirect tax regime. GST also provides various benefits like free flow of credits, hastle free movement of goods, no overlaping of taxes, and others. Specific exemption to an incubatee is a welcome step by the Government to recognise and promote innovation in the fields of science and technology. However, the fine prints of the GST law suggests that the intention of the Government (as publicized) have clearly not been met by the present form of the GST law. The Government in its attempt to impose a single tax across all the nation has failed to appretiate the intricacies of technology business and has botched in achieving its complete objective due to lack of foresight with respect to technology business. An ideal GST regime eliminates distinction between goods and services as all supplies are taxed at a single rate. However, mupliplicity of tax rates and difficulty in determination of time and place of supply has necesiated retention of disctiction between goods and services. The present form of GST law leave a lot of scope for varied interpretations which is likely to result in to possible litigation in the GST regime.