As union Budget 2018 is about to be passed in a few days’ time in the Indian parliament by Honourable Finance Minister Sri Arun Jaitley, it is remained to be seen what is going to be the impact for the business and common man.
|Reduction in corporate tax rate||In the backdrop of global cut in tax rates in economies like USA, ISODA expects the FM and the Budget to provide relief from the headline corporate tax rate of 30%. Coupled with Dividend Distribution Tax, the overall incidence of corporate tax is high in India. A high tax rate may provide to be detrimental to the Indian business scenario and may discourage foreign investment|
|Rationalization of definition of ‘software’ under Income Tax Act||Introduction of a more ‘comprehensive’ definition of ‘Software’ for purposes of section 9(1)(vi) of the Income Tax to remove from its ambit ‘Software’ which is traded in unmodified form|
|Introduction of threshold limit under Section 195||As per Section 195, there is a liability to withhold tax even on small payments such as domain hosting charge. It is proposed to prescribe a threshold for purposes of Section 195, based on value of transaction|
|Reduction in TDS rate in case of software transactions||Akin to the reduction in rate of TDS to 2% in case of call centres in the recent budget, ISODA hopes that the Finance Minister eases the working capital woes of software resellers by introducing a reduction in TDS rate from 10% to 2% for software transactions.|
|Lower withholding tax application mechanism to be made electronic||With more and more data available with the Income Tax Department, there is a need for evolving a mechanism for online application and granting of lower withholding certificates u/s 197 of the Income Tax Act. The certificates may allow for TDS rate at a benchmarked gross profit rate declared by assessee in previous years based on return filed. Strict timelines for issuance of such certificates should also be prescribed.|
|Reduction in number of returns required to be filed||ISODA hopes that government evolve a mechanism to reduce the burden of filing three monthly returns under GST. A monthly return filing procedure on the lines of Form GSTR3B will augur well in reducing the compliance burden.|
|Clarification on ‘employee reimbursements’||Employee reimbursements may emerge as next hotbed of litigation under GST in absence of any clarity on the treatment of employee reimbursements in the GST regime. ISODA expects the government come out with clarification or carve out specific provisions dealing with GST on employee reimbursements to provide clarity on the same.|
|Abolishment or electronic processing of LUTs||In line with the Digital India initiative, it is recommended that filing of LUTs for exporters be moved to an online system thereby offering relief to assessees having pan Indian registrations and operations in multiple states.|
|Ambiguity in determination of place of supply in case of supply of ‘pre-developed’ software||A recent FAQ released by the CBEC has clarified that pre-developed or pre-designed software through the use of encryption keys is ‘supply of goods’. It is recommended that such provision of software resembles and is ‘supply of service’ and deeming the same as ‘supply of goods’ may lead to complications in determining place of supply since it becomes difficult to determine place of supply in case of electronically supplied software where no ‘physical goods’ exist.|
|GST Payable on Cash basis below a threshold||Software resellers work under a low margin and in such a scenario payment of GST on accrual / mercantile basis results in a working capital burden. It is proposed that a scheme for payment of GST on ‘cash’ / ‘receipt’ basis be allowed for assessees below a particular turnover threshold akin to the small service provider scheme under Service Tax|
Infotech Software Dealers Association.