Tax authorities have agreed not to regard BPO’s as ‘intermediaries’
Business process outsourcing (BPO) providers in India serving foreign clients have been spared the 18 per cent tax on services.
This has come about at India’s Goods and Services Tax (GST) Council has agreed not to regard BPO’s as “intermediaries” which would necessitate them paying the 18 per cent tax on services. This waiver by the Indian tax authorities will help BPO firms save millions of dollars in tax payments, according to the country’s financial daily The Economic Times.
The tax authorities in India have long regarded BPO providers as intermediaries, requiring them to pay 18 per cent GST. It has been reported that many Information Technology enabled services providers and foreign-owned Research & Development centres were also treated similarly.
BPOs serving domestic clients will not be exempted
In late 2017, few BPO providers began disputing the tag as an intermediary, arguing that they were not brokers and that they were providing key services to their foreign clients.
However, from now on, BPO providers serving foreign clients will be treated as service exporters, meaning they will no longer need to pay service tax. However, BPOs serving domestic clients will not be exempted.
Nearshore Americas reports that analysts are saying the move is part of the government’s plan to simplify the taxation regime and reduce GST disputes.
India’s BPO industry has employed around 1.5 million people, but it looks significantly smaller when compared with the country’s IT services sector, which includes global giants such as TCS, Infosys, and HCL Tech.
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