IAMAI says GST Bill packs ‘unpleasant surprise’

Even as the government seems optimistic of passing the GST Bill in the monsoon session of Parliament, Internet and mobile industry body, the Internet and Mobile Association of India (IAMAI) representing giants like Google, Flipkart, Facebook, Airtel Money have slammed proposed Goods and Services Tax Bill saying it fails to recognise the digital economy and push back regulatory progress by decades.

"The new GST Bill springs an unpleasant surprise: a 'forward looking' Bill that is supposed to modernise Indian governance fails to recognise the Internet and digital economy in India. It is ironic that on one hand the government is promoting Digital India and Startup India initiatives, on the other hand, the GST seeks to turn the clock back by decades," IAMAI said in a statement.

The IAMAI said the extant service tax profile under proposed GST recognises services like advertising and online information services, online information and database access, Internet telecommunication services and telecommunication services as separate service categories.

It pointed out that 'electronic mail, voice mail, data services, audio text services, video text services, radio paging and cellular mobile telephone services' are clubbed under 'Telecommunication services' and not even Information Technology.

"Clubbing all the sectors under telecommunication services reflects a poor understanding of technology, and a wilful renouncement of the existence of these sectors in India. “This renouncement is compounded further in the section listing activities to be treated as 'supply of service' and also the new 'place of supply of goods and/or Services' section under the new Bill,” the statement said.

According to the IAMAI, non recognition or misinterpretation of the sectors may result in a barrage of unjustified tax demands with insufficient provisions of resolving such disputes. Such an eventuality can throttle the sector and effectively kill it. Recognition of category of services is key to 'locating' a sector in the economy in terms of determining tax liabilities, regulatory compliances etc., it said.

"Most importantly, any dispute can only be resolved by identifying the exact provisions based on official recognitions. For example, online marketplaces could successfully contest claims of VAT payment by positing their services as digital platforms and not retailers," the statement said.

The IAMAI said the transition to the GST regime from the existing tax structure is going to be a major challenge for all sectors of the economy and the regulators as well and such discrepancies will only add to the woe for the Internet sector