The GST Council has classified IT services in the 18 per cent tax slab, Earlier, IT services were taxed at 13-15 per cent, but there were a lot of indirect taxes and areas that were open to interpretation.

Industry watchers say that despite the higher tax, the ambiguity will now be considerably less. According to MN Vidyashankar, President of the India Electronics and Semiconductor Association (IESA), earlier there were two to three levels of indirect taxation, which were subjective. As a result, they could be interpreted differently by the taxman.

“The fact that everything has moved online and there is no manual interference has also helped in transparency,” he added.

Others believe that this increase will hit the industry only in the short term. S Satish, Executive Director, RSM Astute Consulting Group, said the industry can absorb this cost, just as when VAT was introduced, companies took a hit but eventually bouned back.

The industry is also seeking clarity in some areas. “Clarity is awaited on GST on services and treatment of area-based exemptions,” said Rajeev Jain, Director and Group CFO, Intex Technologies. he industry is also awaiting clarity on differential duty on imports and local manufacturing.

India has been a fast-growing IT market in the last couple of years as government initiatives such as Digital India, Smart Cities and a change in consumer behaviour with a preference to use more technology have spurred tech spending.

In 2016, research group Gartner estimated that around $72 billion was spent on IT services, products and hardware, up from 7.2 per cent in 2015. It is expected to touch $85.3 billion by 2019 end. Further, according to a Gartners’ survey, Indian IT budget growth of 11.7 per cent is one of the highest in the world.

E-mails sent to software products and service providers like Microsoft, Tally did not elicit any response.

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