No GST on back-office sector, says govt in intermediary services dispute

The government has said services outsourced to India and those provided domestically for foreign entities will not be treated as intermediary services, enabling them not to pay the 18% Goods and Services Tax (GST), said the Economic Times on Tuesday about a policy decision that strengthens the country’s back office industry.

A meeting of the GST Council clarified this on Friday and this decision will free up tax refunds to companies in information technology, IT ready services, financial services and R&D, the paper said. More than 200 companies are involved in disputes over the definition of “intermediary” services. The disputes started after tax authorities began treating back office service providers or business process outsourcing (BPO) entities as intermediaries, denying them export status.