GST Relief for ITeS

Information Technology enabled Services (ITeS) are services which involve back office and remote maintenance operations. These services also include call centres and data processing centres. The taxability of a particular ITeS under GST depends upon whether or not it is an intermediary service. If the ITeS is intermediate service, it is taxable at the rate of eighteen per cent. An intermediary service provider acts as an agent between the buyer and the seller. Intermediary services are taxable in India even if the service is consumed abroad. On 04.12.2019, the Central Board of Indirect Taxes and Customs (CBIC), through circular no.127/46/2019 issued a clarification regarding ITeS. The effect of the circular is that certain ITeS are no longer to be considered as intermediary services. Thus, the ITeS covered by the circular will not attract GST.

Intermediary Services- Taxability Under GST

An intermediary service refers to making a ‘facilitatory arrangement’ for the supply of goods or services. A facilitatory arrangement is an activity that results in supply from the client to the customers of the client. Intermediary services do not include making a supply in the assessee’s own name. Thus, the supplier of the goods cannot be treated as an intermediary. Intermediary services rendered to clients outside India also fall within the scope of GST levy. The intermediary service will be taxable even when the buyer and seller are located outside India. Intermediary services supplied to international customers are not classified as export. Thus, GST is payable on intermediary services provided to clients outside India.

Services Covered

The circular covers the following services:

• Support services for pre-delivery, delivery and postdelivery of supply
• Support services for order placement, delivery and logistical support
• Support services for obtaining Government clearances
• Support services for transportation of goods
• Post-sales support services

Classification of ITeS

Before the issue of the circular, the taxability of the specified services depended upon the circumstances of the assessee. The circumstances are:

• Scenario I: The assessee supplies the ITeS under the assessee’s name to clients. In this scenario, the assessee is the supplier and cannot be treated as an intermediary. Thus, ITeS do not attract GST. This scenario applies even when the assessee provides services to the customers. When this scenario applies, the assessee can treat the ITeS supplied as an export. Thus, the assessee can claim the benefit of zero-rated supply available for exports.
• Scenario II: The assessee supplies the ITeS by acting as an agent between the buyer and the seller. In this scenario, the assessee is not the supplier. Thus, the assessee should be considered as an intermediary. Thus, ITeS attract GST. When this scenario applies, the assessee is not allowed to consider the ITeS supplied as an export. Thus, the assessee cannot claim the benefit of zero-rated supply available for exports.
• Scenario III: The assessee supplies the ITeS under both of the circumstances mentioned in the above scenarios. In such cases, the Jurisdictional Officer (JO) will decide whether the ITeS are taxable. The JO will arrive at a decision based on the facts and circumstances of each case.

Impact of the Circular

Until 03.12.2019, the specified services were classified as intermediary services, and thus attracted GST. On 04.12.2019, the CBIC issued a circular stating that the three-scenario classification mentioned is no longer applicable. Thus, the specified services are not taxable. The circular of the CBIC is given below for reference:

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Updated on: December 17th, 2024