Supplier of ITesservices will not be covered under the provision of Intermediary and qualityfor export of services however provide of certain backend support services toforeign customer will fall under the definition of intermediary and notqualified for export benefits under GST
The Indian ITeS industry generates significant foreign exchange for India and is one of the emerging hubs of the world. Nevertheless, the Indian ITeS industry has been facing significant competition from its Asian counterparts like Philippines, Vietnam etc. In this context, the Government of India has provided various export incentives to make Indian ites backend support service competitive in the global market.
fhowIn this context, Central Board of Indirect Taxes and Customs has received several representations from trade and industry seeking clarifications on the scope of (ites backend support service )Information Technology enabled Services (“ITeS”) (like call center, business process outsourcing (‘BOP’) services, etc. and services by “Intermediaries” under GST law. There were questions raised whether the same qualify to be “export of services” under GST law.
Vide Circular No. 107/26/2019-GST dated 18 July 2019, the CBIC has provided clarifications on the ites backend support service. In this context, the CBIC has clarified that the ITeS services not provided to own account shall not be considered as “Intermediary services” and shall be considered as ‘export of services’ if other conditions are satisfied.
The summary of the Circular is given below:
As per Section 2(13) of the Integrated Goods and Service Tax Act, 2017 (“IGST Act”), an Intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.
The definition of intermediary provides a specific exclusion of a person who supplies such goods or services or both or securities on his own account. Accordingly, the service provider would not be considered as an “Intermediary” if he is involved in the supply of services on his own account, even while acting as an agent/ broker or any other person.
ITeS is not defined under the GST law. However, the definition of ITeS can be traced to Rule 10TA(e) of the Income-tax Rules,1962 on the provisions of Safe Harbour Rules for International Transactions.
ITeS means the following business process outsourcing services provided mainlywith the assistance or use of information technology, namely:
However, ITeS specifically excludes any research and development services whether or not in the nature of contract research and development services.
Such backend services may include support services, during pre-delivery, delivery and post-delivery of supply (such as order placement and delivery and logistical support, obtaining relevant Government clearances, transportation of goods,post-sales support and other services, etc.).
Un proveedor de servicios ITeS que no sea considerado un "intermediario" según la Sección 2(13) de la Ley IGST sería elegible para beneficios a la exportación bajo la legislación del GST. El servicio se consideraría una "exportación de servicios" si se cumplen todas las condiciones siguientes según la Sección 2(6) de la Ley IGST:
Estas aclaraciones por parte de la CBIC son una medida bienvenida que sin duda alegrará a la industria ITeS de la India. Al aplicar esta circular y determinar que los servicios no tienen la naturaleza de "servicios de intermediación", estos pueden calificar como "exportación de servicios" y ser elegibles para reembolso, siempre que se cumplan las demás condiciones.
