The Hindu Business Line : Impact of new EU tax regime only marginal, says Nasscom

Hyderabad, Nov. 16 The Nasscom (National Association of Software and Services Companies) has said that the impact of the upcoming Value Added Tax regime in the European Union would have a marginal impact on the Indian industry.

“The changes are procedural in nature and the impact on the industry would be marginal. The harmonisation of rules will in fact improve procedural efficiency,” the association said here in a statement.

The new VAT regime would come into force in the EU countries beginning January 1, 2010. The system will establish new rules for determining the place of taxation for services, ensuring that services are taxed in the member-state of consumption instead of location of supply.

The prospect of a new regime had triggered some fears in a section of the industry. The Nasscom, however, clarified that there would be no major impact.

“The onus of remitting the taxes for VAT will now be on the consumer of services through self-assessment post January 2010,” it said.

“The VAT rates differ from one State to another for the services rendered by the Indian IT-BPO industry to customers based in the EU member-states. The new tax system would harmonise most of such discrepancies,” it pointed out.

TCS said there would be no impact. “There is no impact on TCS since in the European countries, where we have subsidiaries, clients were paying VAT on all onsite and offshore services. Hence this new law has no impact on our financials from this perspective,” Mr S. Mahalingam, Chief Financial Officer , said.

The main change is that VAT instead of being charged at the point of origination or services, will be charged at the point of delivery of services from next year. “Hence there is no additional tax, just the point of levying of the tax has changed,” he said.

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