Central Board of Indirect Taxes and Customs (CBIC) has issued a Circular No. 107/26/2019-GST dated 18th July, 2019 to clarify doubts relating to the supply of IT-enabled services such as call center, BPO and Intermediaries services provided by Indian suppliers to overseas entities.
Key Points of the Circular are:
- CBIC clarifies that “Intermediary” as defined Section 2(13) of the Integrated Goods and Service Tax (IGST) Act, 2017, provides specific exclusion of a person who supplies goods or services or both or securities on his own account. The supplier of services would not be treated as “intermediary‟ even if the supplier of services qualifies to be “an agent/ broker or any other person” if he is involved in the supply of services on his own account. Information Technology enabled Services (ITeS services), though not defined under the GST law, have been defined under Rule 10(e) TA of the Income-Tax Rules, 1962.
- CBIC has clarified the doubts relating to the supply of IT-enabled services with the help of various possible scenarios listed below –
The supplier of ITeS services who supplies back end services, will not fall under the ambit of intermediary as defined under Section 2(13) of the IGST Act, 2017 where these services are provided on his own account by such supplier. Even where a supplier supplies ITeS services to customers of his clients on clients behalf, but actually supplies these services on his own account, the supplier will not be categorized as intermediary.
In other words, a supplier “A” supplying services, as listed in Rule 10(e) TA of Income Tax Rules, 1962, on his own account to his client “B” or to the customer “C” of his client would not be considered as an intermediary.
The supplier of backend services located in India arranges or facilitates the supply of goods or services or both by the client located abroad to the customers of client. Such backend services may include support services, during pre-delivery, delivery and postdelivery 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.). The supplier of such services will fall under the ambit of intermediary under Section 2(13) of the IGST Act, 2017 as these services are merely for arranging or facilitating the supply of goods or services or both between two or more persons.
In other words, a supplier “A” supplying backend services as mentioned in this scenario to the customer “C” of his client “B” would be treated as intermediary in terms of Section 2(13) of IGST Act, 2017.
The supplier of ITeS services supplies back end services, on his own account along with arranging or facilitating the supply of various support services during pre-delivery, delivery and post-delivery of supply for and on behalf of the client located abroad. In this case, the supplier is supplying two set of services, namely ITeS services and various support services to his client or to the customer of the client. In this scenario, whether the supplier of such services would fall under the ambit of intermediary under Section 2(13) of the IGST Act, 2017 will depend on the facts and circumstances of each case.
In other words, whether a supplier “A” supplying services as well as support services listed in Scenario -II above to his client “B” and / or to the customer “C” of his client is intermediary or not in terms of Section 2(13) of the IGST Act, 2017 would be determined in facts and circumstances of each case and would be determined keeping in view which set of services is the principal / main supply.
- CBIC has further clarified that supplier of ITeS services, who is not an intermediary in terms of Section 2(13) of the IGST Act,2017 can avail benefits of export of services if the criteria as mentioned in Section 2(6) of the IGST Act, 2017 for export of services are satisfied.
For further details please refer the attached document.