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

More than 200 companies are involved in disputes over the definition of intermediary services, says report.

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.

The GST Council’s 45th meeting in Lucknow took several important decisions and set the ball rolling for two structural changes. The council extended concessional rates for several drugs, such as Remdesivir, used to treat Covid-19. It also reduced duty on some other drugs like Itolizumab and Posaconazole till December.