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B2C IT services and solutions to get expensive from Jan. 1: SLASSCOM
- IT B2C segment slated to take a hit, SLASSCOM cautions
- Companies have raised concerns due to lack of level playing field
- Says there will be “a big discrepancy in pricing”, which is of concern
- Asserts lowering threshold and removing exemptions will add to administrative burden for businesses
Procuring IT services and solutions is going to get expensive, with the Value Added Tax (VAT) coming into effect from January 1 and could create unfairness within the industry, the Sri Lanka Association for Software and Services Companies (SLASSCOM) cautioned.
SLASSCOM Chairman Jehan Perinpanayagam noted that while business-to-business (B2B) would not be impacted much, the business-to-consumer (B2C) segment is slated to take a hit.
“Business in the B2C space will see changes, due to the VAT and their consumers are going to see a significant, steep rise in pricing.
These companies have expressed concerns, particularly as there isn’t a level playing field. For companies that are registered as international service providers, this will not be applicable, whereas for companies registered locally, the VAT will apply. So, there will be a big discrepancy in pricing, which is of concern,” said Perinpanayagam.
The IT/BPO sector representative expressed his views while addressing a webinar by CMA that explored the impact of the VAT on the industry, commerce and society.
According to Perinpanayagam, the industry will see its woes increase come January, due to the requirement of having to pay the VAT on a fixed date, which will impact cashflows.
“As highlighted by several stakeholders across diverse sectors, there will be a general increase in prices, which will mean now the biggest cost factor for the IT/BPM sectors is employee-related costs. There is going to be a knock-on impact, as they will demand for pay increases,” he said, pointing out that the sector is already “badly” impacted by migration.
Perinpanayagam noted that for the IT/BPM sector, the implications that would stem from the VAT increase and the removal from the exemption list are a matter of major concern. He went on to point out that the indirect impact of the upcoming changes could also disrupt supply chains and consumer spending. “Lowering the threshold and removing exemptions would add to the administrative burden for businesses, potentially increasing costs and slowing down. Reduced purchasing power of consumers, higher prices and slower wage growth means less disposable income. This could impact some of our retail businesses,” cautioned Perinpanayagam.
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