New Delhi, Oct 8 — Nasscom on Thursday said that the recommendations of the GST Council have addressed longstanding concerns affecting service exports, input tax credit, refunds, and compliance, while the proposal on notices, prosecution, and arrest powers also signals a more proportionate approach to tax enforcement.
"We appreciate the constructive engagement of the Union and State Governments, the Ministry of Finance and CBIC with industry on these issues," the apex trade association for the IT software sector said in a statement.
For the IT and IT-enabled services (IT-ITeS) industry, the recommendation on services supplied through overseas branches is especially welcome. Indian companies frequently serve overseas customers through their branches abroad. Under the present law, services supplied from an Indian office to its overseas branch can fail to qualify as exports because both are establishments of the same person.
The Council's recommendation to remove this restriction addresses a longstanding concern that Nasscom has raised with the government. Subject to the other export conditions, it should reduce tax uncertainty, litigation, and unnecessary working capital costs, according to the Nasscom statement.
It further stated that the GST Council has also recommended a change in the place-of-supply treatment for research, testing, certification, and engineering services performed in India on goods belonging to overseas customers. The physical presence of a customer's prototype or sample in India can currently prevent such services from qualifying as exports. The proposed change should benefit engineering R&D firms, global capability centres (GCCs) and deep-tech start-ups providing qualifying research and testing services to overseas customers. It could also help India attract more global research and engineering mandates.
For e-commerce, the proposed simplified registration mechanism for smaller sellers using platform warehouses in other states is welcome. It would help small businesses participate in interstate online commerce without having to establish their own premises in every state.
Nasscom also welcomed the proposed extension of inverted-duty refunds to input services, refund eligibility for plant and machinery, and faster processing of refunds. The Council's recommendation to allow input tax credit for employee health and life insurance addresses another longstanding industry concern. These changes should reduce the amount of legitimate tax credit tied up in business expenditure, the Nasscom statement added.