Karnataka reduces ST to 0.25%

BANGALORE: Giving in to the demands of the IT industry in the state, the Karnataka government has reduced the Karnataka sales tax (KST) to 0.25 per cent from 4 per cent and has also announced a total exemption of tax on works contract of maintenance of computers and hardware equipment.

As per a notification issued by the government of Karnataka, the tax payable on the sale of computer, computer peripherals, computer consumables and computer cleaning kit falling under serial 20 of Part 'C' of second schedule have been reduced to 0.25 per cent.

According to Association of Information Technology (AIT), the industry is yet to get a clear picture on the applicable central sales tax, exemption of turnover tax on second and subsequent sales, exemption of tax on works contract on network cabling and integration and sales tax on UPS to be unified under IT classification. The government has not released a written announcement on these aspects, they alleged.

The AIT president Leslie J. Lean said he was happy about the reduction on the sales taxes and added, "We have been asking for a reduction on taxes since the time 4 per cent tax was declared. We were worried about losing business to other states but now we are glad about this."

Mr Lean had said that increase in sales tax on IT products from 0 to 8.5 per cent in consonance with the announcement of uniform sales tax would hinder the national and state objective of increasing PC penetration, and lead to shift of business to neighboring states, encouragnig grey market players.

He had also pointed out that some of the states had already rolled back the sales tax on IT products and some like Pondicherry and Tamil Nadu had not even accepted the uniform sales tax recommendation. As a result, the IT business in the state had practically come to a standstill due to 8.4 per cent sales tax burden, with people in Karnataka purchasing IT products from neighboring states.