In a round so one can have some distance-accomplishing implications on the export and ITeS network, the Government has clarified that anyone engaged in the facilitation of supply of goods/services will no longer be considered to be engaged in export and will now be taken into consideration as middleman, unless it’s miles on his personal account. This would mean carrier companies engaged in backend offerings which includes placement and delivery and logistical aid, obtaining applicable Government clearances, transportation of products, put up-sales assist services and others will now come below the ambit of GST and can be taxed at 18%.
With this round most BPO-KPO offerings can now be treated as intermediaries below GST regulations and be taxed beneath GST. Through the Circular, CBIC has attempted to provide clarifications on applicability of concept of ‘intermediary services’ and its consequent treatment under GST for Information Technology enabled Services (‘ITeS’), Back Office Support offerings and so forth.
It has been emphasized that a dealer of provider would not be dealt with as intermediary, if services are being provided on his own account, notwithstanding him qualifying as an agent/ dealer. Further, the Government has tested numerous scenarios, in which a dealer of ITeS placed in India materials offerings for and on behalf of a client placed overseas, to make clear its treatment below GST and damaged it down in to three situations.
Scenario 1:
Supplier of provider gives ITeS (backend services as enlisted underneath Rule 10TA(e) of Income tax Rules) on his own account to his clients or customers of his customer’s (on consumer’s behalf).
It has been clarified that such provider carriers would now not qualify as middleman as he is supplying services on its personal account.
Accordingly, the stated offerings may qualify as export of carrier beneath GST.
The stated role could hold exact, even supposing such offerings are supplied to the customers of the customer’s, on patron’s behalf.
Scenario 2:
Supplier of backend services placed in India arranges or enables the deliver of goods/ offerings by way of the consumer placed overseas to the customers of purchaser
It has been clarified that such carrier companies would qualify as middleman under GST.
This shall cover again-quit offerings which include support offerings (at some stage in pre-delivery, delivery and submit-transport of supply) which include order placement and shipping and logistical guide, obtaining applicable Government clearances, transportation of goods, publish-income assist services.
The provision of such offerings is merely for arranging or facilitating the deliver of products or services between or extra humans.
Accordingly, export benefit might now not be to be had on supply of such services.
Scenario three:
Supplier of ITeS resources lower back quit offerings (as enlisted under Rule 10TA(e) of Income tax Rules) on his very own account at the side of arranging or facilitating the deliver of numerous assist services throughout pre-shipping, transport and publish-delivery of supply for and on behalf of the customer placed overseas [i.E. Scenario 1+ Scenario 2]
It has been clarified that category of such services as intermediary might depend upon the information and instances of every case.
It must be decided which set of the carrier (i.E. Scenario 1 offerings or Scenario 2 offerings) could represent as the most important or major deliver.
Accordingly, export advantage would not be available in case the Scenario 2 services (i.E. Arranging or facilitating the supply of numerous help services at some point of pre-delivery, delivery and post-transport of supply for and on behalf of the consumer placed overseas) might constitute as the foremost or fundamental deliver.
In Scenario 1, the said Circular clarifies, to the comfort of the enterprise, that the availability of returned-give up offerings (consisting of again office operations, name centre services, aid centres, payroll, sales accounting, records processing offerings etc.) on its personal account might now not be covered within the ambit of middleman.
This fortifies the argument that returned office offerings in general do not fall in the ambit of middleman offerings, as rightly held underneath recent rulings pronounced via Maharashtra Authority of Advance Ruling (AAR) in case of M/s NES Global Specialist Engineering Services Pvt. Ltd. And Asahi Kasei India Private Limited.
On a flipside, the explanation supplied in Scenario 2 furthers the recent ruling via the Maharashtra Appellate Authority of Advance Ruling (‘AAAR’) in case of M/s. Vservglobal Private Limited. In the stated ruling, AAAR had opined that the services in question (which included liaising with purchaser’s buyers/suppliers with admire to delivery, transportation of goods, and settlement of price among them) had been plenty past again workplace help offerings and had been inside the nature of facilitation of the deliver of the goods between the two events i.E. Patron of the applicant and the providers/ clients of the Client. Accordingly, the stated offerings have been held to be middleman offerings.
“Until now, fashionable advertising and marketing, responding to enquiries of customers of overseas organization entities, imparting publish-sales assist and many others. Whilst facilitating between foreign places organization organizations and Indian customers, have been usually now not considered as intermediary offerings, and for this reason advantage of exports become being claimed. This role would now need to be re-visited in mild of Para 5.2 of the Circular.” said Harpreet Singh, Partner in KPMG India.
The fear now could be that the Circular would keep to gas the talk as to which lower back-end offerings constitute as assist services (throughout pre-delivery, transport, submit-shipping of deliver, post sales guide) and which services would qualify as ‘arranging or facilitating the supply of goods or offerings between two or extra humans’.
It is essential to notice that a lot of MNCs have trading homes in India to facilitate wellknown advertising. With this circular it can now not qualify as exports and get charged at 18%. In reality the exchange our bodies had these days requested the authorities to dispose of the idea of ‘intermediaries’, however the Government has long gone in advance and widened the scope of what constitutes as intermediaries.
“It is essential for the Government to make certain that Indian returned workplace support services continue to be globally competitive and we do no longer lose out paintings to other international locations. Thus, the tax regime wishes to conducive” adds Singh.
