According to industry estimates, 200-plus companies have some form of dispute on the definition of “intermediary” services. There is no GST levied on goods or services exported, but intermediary services are taxed even if supplied to foreign entities. Back-office services were in the pre-GST regime treated as exports and not taxed. GST authorities have started disputing the status of export earnings and are seeking to treat those as “intermediary” services. Industry body Nasscom has represented the matter to the finance and commerce ministries for expeditious resolution. “There are increasing cases where the GST authorities have aggressively interpreted the scope of intermediary services to cover ITeS/ BPM,” it said in a representation, seen by ET.
The implication of treating ITeS/ BPM as “intermediary”, it said, was that exports get taxed at 18%. Refund claims on input credit of GST are denied, it said, adding: “This is resulting in denial of refunds, excessive investigations, litigation and making ITeS/BPM in India uncompetitive.” The issue arose following a Maharashtra Appellate Authority for Advance Rulings decision in a case involving VServe Global. The appellate body in February 2019 upheld an Authority for Advance Rulings decision that back-office support services to overseas customers were intermediary services and hence liable to tax and not eligible for tax refunds.