Gst For It Services

To clear up various confusions prevailing in the Information Technology enabled Services (ITeS), the Central Board of Indirect Taxes and Customs (CBIC) recently came up with the circular no. 107/26/2019-GST clarifying various issues. The said circular has a far-reaching effect on ITeS/BPO, and the same is explained in the present article. Before understanding the clarification, it is significant to understand coverage of two important terms, namely ‘Intermediary’, and ‘Information Technology enabled Services’. The definition of the term ‘intermediary’ is contained under section 2(13) of the Integrated Goods and Service Tax Act, 2017 which means:

An agent, a broker or any other person who facilitates or arranges the supply of services or goods or both or securities between two or more persons. However, it doesn’t include a person who supplies such services or products or both or securities on his account.

The definition of the term ‘

Information Technology enabled Services’ has not been provided under the Goods and Service Tax Law, and hence, reliance has been placed on the definition provided under rule 10TA(e). As per the said rule, ‘Information Technology enabled Services’ means the business process outsourcing services, which are provided with the assistance or use of the information technology.

The back-office operations; contact centre services or call centres; legal databases; data processing and data mining; insurance claim processing; payroll; creation and maintenance of medical transcription except medical advice; remote maintenance; support centres; translation services; website services; revenue accounting; remote education except education content development; data search integration and analysis are business process outsourcing services. However, it doesn’t include any research and development services.

Clarification issued by the CBIC

In the circular, the clarification is provided based on various situations/scenario which has been explained in the below table:

Situation	Clarification
The supplier of ITeS services (backend services) supplies services on his account to the client or the customers of the clients on the clients’ behalf.	Since the services are provided on his account, the supplier will not fall within the ambit of ‘intermediary’.
The supplier of backend services (located in India) facilitates or arranges the supply of services or goods or both by the client (located abroad) to the customers of the client. Please note the backend services may include support services, during pre-delivery services, delivery services and post-delivery services.	Since the services relate to facilitating or arranging the supply of services or goods or both between two or more person, the supplier of such backend services will fall within the ambit of ‘intermediary’.
The supplier of ITeS supplies backend services on his account and arranges or facilitates the supply of various support services for and on behalf of the client (located abroad).	The supplier is supplying two sets of services, i.e. ITeS and various support services. The Classification of such services as ‘intermediary’ would rest on the facts and circumstances of an individual case. The Classification would also be determined, keeping in view which set of services is the main/principal supply.

Clarification with regard to ‘export of services’

Meaning of the word ‘export of services’ is laid down under section 2(6) of the Integrated Goods and Service Tax Act, 2017. Accordingly, ‘

export of services’ means the supply of any service fulfilling the following criteria:

The supplier of service is located in India
The recipient of service is located outside India
The place of supply of service is outside India
The payment has been received by the supplier in convertible foreign exchange, and
The supplier of service and the recipient of service are merely not an establishment of a distinct person

It has been clarified that the ITeS services who satisfies all the above-listed conditions and who are not intermediary are eligible to avail the benefit of export of services.

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Frequently Asked Questions

Common questions about GST for IT Services.

An intermediary is an agent, broker, or any other person who facilitates or arranges the supply of services or goods between two or more persons. However, a supplier of ITeS services provides services on their own account to the client or customers of the client, and does not fall under the definition of an intermediary.

For a service to qualify as 'export of services' under GST, it must meet the following criteria: the supplier of service is located in India, the recipient is located outside India, the place of supply is outside India, the payment is received in convertible foreign exchange, and the supplier and recipient are not merely establishments of a distinct person.

Yes, in such a case, the supplier of ITeS services facilitates or arranges the supply of services between the client (located abroad) and the customers of the client. Hence, the supplier will be considered an intermediary under GST.

The classification of a supplier providing both ITeS and support services as an intermediary or not depends on the facts and circumstances of each case. It is determined by considering which set of services is the main or principal supply – ITeS services or support services.

Yes, research and development services are excluded from the definition of 'Information Technology enabled Services' under GST. The definition covers business process outsourcing services like back-office operations, contact centers, data processing, and website services, but explicitly excludes research and development services.

Yes, a supplier of ITeS services located in India and providing services to a client located outside India can avail the benefit of 'export of services' under GST, provided they meet all the criteria for 'export of services' and are not considered an intermediary.

The circular issued by the CBIC clarifies various issues related to ITeS services and their classification as 'intermediary' or 'export of services' under GST. It provides guidance based on different scenarios and has far-reaching effects on the ITeS/BPO sector.

Yes, in such a case, the supplier of ITeS services is arranging or facilitating the supply of support services for and on behalf of the client located abroad. This would classify the supplier as an intermediary under GST, subject to the facts and circumstances of the case.

Determining whether a supplier of ITeS services is an intermediary or not is crucial under GST because intermediaries are not eligible for the benefit of 'export of services'. This classification has implications on the tax treatment and compliance requirements for the supplier.

The term 'Information Technology enabled Services' is not explicitly defined under the Goods and Service Tax Law. Instead, the definition is derived from Rule 10TA(e), which defines it as business process outsourcing services provided with the assistance or use of information technology, excluding research and development services.