New Delhi, March 1, 2017
Instead of a single centralized registration system for paying service tax, service providers across India will have to obtain more than 30 separate registrations
The goods and services tax (GST) council is likely to retain a clause in the law that will require service providers to register in every state where they operate, despite recent representations from various Union ministries and telcos, banks, and insurance firms for a single registration system.
At present, service providers benefit from a single centralized registration system for paying service tax—a tax levied and collected by the Union government.
However, under the GST regime, even states will get the powers to collect tax on services and the service providers will have to register in every state where they have operations.
As per the provisions of draft GST laws that will be finalized in the 11th meeting of the GST council on 4, and 5 March, service providers operating across India will have to obtain more than 30 separate registrations. Companies have highlighted the procedural hassles of such a move but states, concerned about their revenue, are not willing to agree to a centralized registration.
“States have not agreed for a centralized registration system as they are worried this will lead to revenue losses because the tax will have to be apportioned between the various states,” said a government official seeking anonymity.
In a letter addressed to the Prime Minister last week, even the association representing the central Indian revenue service officers had highlighted the negative impact of the provision on the ease of doing business pointing out that a company providing services across India will have to file almost 2,000 returns per year under GST.
“Service providers in the banking, insurance, logistics, IT (information technology) & IT-enabled services and aviation sectors are operating under a single centralised registration of service tax at present. That means, at present, they have to file three service tax returns in one year. In GST era, they will have to file 61 returns per state, per year, after taking registration in each state in which they have presence,” the letter said.
Bishakha Bhattacharya, senior director at Nasscom, said the IT industry has been pushing for a single registration to minimize the impact on business operations.
“In the IT sector, clients are serviced at multiple locations under the same contract. Now, as per the provisions of the law, we may require to bifurcate billing based on place of supply rules. Export competitiveness will also be hit as overseas clients may be uncomfortable on presentation of multiple invoices for the same service,” she said. “Even if the laws do not make a provision for single registration, we are hoping for some leeway subsequently,” she added.