GST: Advocacy on early resolution of issues around ‘intermediary services’ for IT-ITeS sector

Terms of use

Terms of Use

The use of this site and the content contained therein is governed by the Terms of Use. When you use this site you acknowledge that you have read the Terms of Use and that you accept and will be bound by the terms hereof and such terms as may be modified from time to time.

All text, graphics, audio, design and other works on the site are the copyrighted works of nasscom unless otherwise indicated. All rights reserved.
Content on the site is for personal use only and may be downloaded provided the material is kept intact and there is no violation of the copyrights, trademarks, and other proprietary rights. Any alteration of the material or use of the material contained in the site for any other purpose is a violation of the copyright of nasscom and / or its affiliates or associates or of its third-party information providers. This material cannot be copied, reproduced, republished, uploaded, posted, transmitted or distributed in any way for non-personal use without obtaining the prior permission from nasscom.
The nasscom Members login is for the reference of only registered nasscom Member Companies.
nasscom reserves the right to modify the terms of use of any service without any liability. nasscom reserves the right to take all measures necessary to prevent access to any service or termination of service if the terms of use are not complied with or are contravened or there is any violation of copyright, trademark or other proprietary right.
From time to time nasscom may supplement these terms of use with additional terms pertaining to specific content (additional terms). Such additional terms are hereby incorporated by reference into these Terms of Use.

Disclaimer

The Company information provided on the nasscom web site is as per data collected by companies. nasscom is not liable on the authenticity of such data.
nasscom has exercised due diligence in checking the correctness and authenticity of the information contained in the site, but nasscom or any of its affiliates or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this site. The information from or through this site is provided "as is" and all warranties express or implied of any kind, regarding any matter pertaining to any service or channel, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement are disclaimed. nasscom and its affiliates and associates shall not be liable, at any time, for any failure of performance, error, omission, interruption, deletion, defect, delay in operation or transmission, computer virus, communications line failure, theft or destruction or unauthorised access to, alteration of, or use of information contained on the site. No representations, warranties or guarantees whatsoever are made as to the accuracy, adequacy, reliability, completeness, suitability or applicability of the information to a particular situation.
nasscom or its affiliates or associates or its employees do not provide any judgments or warranty in respect of the authenticity or correctness of the content of other services or sites to which links are provided. A link to another service or site is not an endorsement of any products or services on such site or the site.
The content provided is for information purposes alone and does not substitute for specific advice whether investment, legal, taxation or otherwise. nasscom disclaims all liability for damages caused by use of content on the site.
All responsibility and liability for any damages caused by downloading of any data is disclaimed.
nasscom reserves the right to modify, suspend / cancel, or discontinue any or all sections, or service at any time without notice.

For any grievances under the Information Technology Act 2000, please get in touch with Grievance Officer, Mr. Anirban Mandal at data-query@nasscom.in.

New

See all

No notification found.

GST: Advocacy on early resolution of issues around ‘intermediary services’ for IT-ITeS sector

Tejasvi

@tejasvi

June 26, 2020

Public Policy

1054

IT-ITeS industry has been grappling with challenges around being treated as intermediary and being exposed to GST on exports. NASSCOM has been diligently pursuing this matter with the Ministry of Finance, the Law Committee, the GST Secretariat and the Board (CBIC) and have made several submissions earlier. However, the industry is still awaiting a concrete resolution.

Lack of clarity in definition of “intermediary services” has led to tax authorities trying to classify ITeS back office support work involving three parties, i.e., customers of clients (including call centres, business process outsourcing for sales or procurement functions, etc) as “intermediary services” and not exports. Further, there were very limited to no disputes under service tax (prior to GST) on interpretation of “intermediary services” (through the same definition as under GST). However, the challenges have increased considerably under GST.

Increased in number of cases involving denial of refunds;
Increase in number of enquiries, audits/ investigations leading to unnecessary litigation;
Contrary rulings/ decisions passed by Advance Ruling Authorities in various States.

It is also apprehended that if no immediate remedial relief is extended to Indian entity, this could trigger issuance of a show cause notice even on the export turnover for past periods of such companies.

The increasing trend of the Indian revenue authorities in trying to tax various categories provided by the ITeS sector is concerning. The magnitude of the issue can be gauged by the fact that the industry earned foreign exchange of USD 136 billion during FY 2018-19. Denying export status to the exporters in the ITeS sector and the alleged tax demand will hamper the sector’s business viability in India.

In this regard, we have made a submission to GST Policy Wing along with officials of CBIC requesting for early resolution of issues around “Intermediary services”. We have requested that:

An amendment to IGST Act by way of insertion of an explanation to Section 13(8)(b) of IGST Act, 2017 be considered:

“Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to services in nature of contract research and development services related to IT sector and information technology enabled services which are provided by a supplier located in taxable territory to a service recipient outside the taxable territory.”

Alternatively, a notification under Section 13(13) be considered for specification of place of supply for services provided by the IT-BPM sector. This notification should be specifically stated for “uniform application of rules” and hence clarificatory or retrospective in nature.
Where the above 2 options are not feasible, a revised circular may be expeditiously issued, taking cognizance of the above issue and clarifying that ITeS companies providing BPO services are not covered within the meaning of “Intermediary” as these services are supplied on their own account. Further, it should be explicitly laid down that provision of services under sub-contracting arrangements do not qualify as “Intermediary” services;
No show cause notices should be issued for the past period alleging suppression of facts, given that the facts were clearly disclosed during all refund filings and no adverse action should be taken on the export turnover, till the “intermediary” issue attains finality in Courts or through a circular; and
Subsequent refunds may continue to be sanctioned to allow the Company to have a continuous cash flow, as most of BPOs continue to enjoy the benefits in other tax jurisdictions, without a dispute over their export position.

We will continue to engage with the government on this. We will keep you posted on further developments in this regard.

Disclaimer

That the contents of third-party articles/blogs published here on the website, and the interpretation of all information in the article/blogs such as data, maps, numbers, opinions etc. displayed in the article/blogs and views or the opinions expressed within the content are solely of the author's; and do not reflect the opinions and beliefs of NASSCOM or its affiliates in any manner. NASSCOM does not take any liability w.r.t. content in any manner and will not be liable in any manner whatsoever for any kind of liability arising out of any act, error or omission. The contents of third-party article/blogs published, are provided solely as convenience; and the presence of these articles/blogs should not, under any circumstances, be considered as an endorsement of the contents by NASSCOM in any manner; and if you chose to access these articles/blogs , you do so at your own risk.

Tejasvi

Call for Inputs: SEBI's consul...

Swapnil