Understanding the impact of GST on India’s IT sector is really important for all of us in this new modern age. Before GST, India had a complicated tax system with many different taxes. Thus, causing confusion in India’s IT Sector.
But GST simplified things by bringing all these taxes together. This made it easier for businesses to do their taxes and follow the rules.
In this article, we will explore how GST has an impact on the IT Sector.
Is GST Applicable to software Imports?
Yes, imported software falls under HSN Code 997331, making it an import of service.
However, IT Companies or individuals don’t need to file a Bill of Entry for services, but they must pay IGST based on RCM as per Notification 10/2017-IT from June 2017.
After payment, it’s reflected in the GSTR-1, allowing the importer to claim Input Tax Credit through GST Return Filing form GSTR-3B.
Wish to quickly and accurately claim ITC as an IT Company?
Consult a professional CA from our team and know the process in easy way to do so:
What Is the GST Rate on Software or IT Services?
GST applies to IT & software services, including design, development, customization, enhancement, implementation, or up-gradation, with a rate of 18%.
In addition, Physical software falls under HSN Code 8523-80-20, also taxed at 18%.
Additionally, the transfer of software IPR is considered a service and carries an 18% GST rate.
The impact of GST on the Indian IT industry
Before GST, when you bought software, you had to pay different taxes like VAT and service tax. It was a bit confusing. Some states charged around 5%, and service tax was 15%. There was also excise duty implemented on IT Services.
But now, with GST, it’s simpler.
You don’t have to deal with all those different taxes.
Thus, the applicability of GST on Indian IT Industry gets rid of the confusion and double taxation.
However, because of this higher 18% GST rate, the cost of software and IT services has gone up significantly.
Businesses will also have to spend more on things like infrastructure and administration with the rising demand of technology. But with the help of Input Tax Credit, you can save and benefit a lot.
Thus, the IT businesses able to generate GST Invoices and comply with the GST laws in an efficient manner are able to sell more software and gain trust of their customers. If you need help with GST for your software company, experts at E-StartupIndia can assist you with compliance and making GST-friendly invoices.
Trademark Registration for Computer Software and Electronics: Trademark Class 9
Moreover, If you want any other guidance relating toGST on the Indian IT industry, please feel free to talk to our business advisors at 8881-069-069.
Download E-Startup Mobile App and Never miss the latest updates narrating to your business.