A rant on Taxes

Benjamin Franklin is reputed to have said "In this world nothing can be said to be certain, except death and taxes.". I run a (very) small business that develops software to be sold to the construction/infrastructure industry.

What with the prospect of a global depression, the construction industry is not exactly going through a happy phase right now. Consequently the business outlook is exceedingly grim and death" has definitely been on my mind. With "death" so near can "taxes" be very far?

In their infinite wisdom the Income and Excise Tax Departments have come up with a circular stating that all software sold from April 2008 onwards shall be liable to Goods AND Service Tax i.e. software is both a Good as well as a Service. What the Tax Department is saying is that software is both Tangible as well as Intangible, with one deft circular this government department has changed the laws of physics.

This has the immediate impact of applying a 4% Valued Added Tax (V.A.T) AND a 12.36% Service Tax on any product that we sell. Thus increasing the cost of our product by 16.36%. One esteemed cash-strapped customer has flatly declared that he won't pay and that we will have to pay the additional 12.36% tax from our meagre margin.

There's a point where doing the business costs more than not doing the business, and the margin simply cannot be made up in volume. As a result, small independent business owners like myself are simply closing in favor of doing something else. Something easier and more profitable.