| 0 Comments |
NEW DELHI: The government said select business process outsourcing (BPO) services will qualify as exports and therefore won’t be subject to goods and services tax (GST), marking a substantial relief for the country’s $167 billion IT and ITES (information technology enabled services) sector.
“The clarification will help in settling most of the frivolous objections regarding export of services in case of intermediary services,” said Bipin Sapra, partner, EY.
Exports don’t face tax in the country as they are consumed outside. Back-office services enjoyed this benefit even in the erstwhile service tax regime. India has more than 500 global in-house delivery centres, employing over 350,000 people. An 18% levy on these services will derail the cost dynamics of the back-office dynamics of the back-office model that operates on thin margins and faces competition from other low-cost jurisdictions such as the Philippines.
The circular has clarified the applicability of GST in various scenarios related to an ITeS supplier located in India working for and on behalf of a client located abroad. A ITeS company supplying back-end services won’t be categorised as an intermediary if providing the services on its own account, in light of the definition of the term “intermediary” under GST law, the circular said.