(Riya Singh, Intern Journalist): The country’s $147 billion IT and ITeS industry has sent an urgent request to the government on denial of export status that has made them liable to 18% goods and services tax. The industry fears it could cascade into denial of refunds on taxes paid on inputs, as well as audits, probe, and tax demand. The industry has sought immediate government intervention in the matter.
According to industry estimates, 200-plus companies have some form of dispute on the definition of “intermediary” services. There is no GST levied on goods or services exported, but intermediary services are taxed even if supplied to foreign entities. GST authorities have started disputing the status of export earnings and are seeking to treat those as “intermediary” services.
The implication of treating ITeS/ BPM as an “intermediary” was that exports get taxed at 18%. Refund claims on input credit of GST are denied. This is resulting in a denial of refunds, excessive investigations, litigation, and making ITeS/BPM in India noncompetitive. The issue arose following a Maharashtra Appellate Authority for Advance Rulings decision in a case involving VServe Global. The appellate body in February 2019 upheld an Authority for Advance Rulings’ decision that back-office support services to overseas customers were intermediary services and hence liable to tax and not eligible for tax refunds.
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