CBIC issued clarification on supply of ITeS services under GST

Central Board of Indirect Taxes and Customs has clarified on issues related to supply of Information Technology enabled Services (“ITeS services”) such as call center, business process outsourcing services, etc. and “Intermediaries” to overseas entities under GST law, by a circular dated 18th July, 2019. This clarification has been issued in response to various representations received.

The Board discussed the various possible scenarios when a supplier of ITeS located in India supplies services for and on behalf of a client located abroad:

1. The supplier of ITeS supplies back end services and will not fall under the ambit of ‘intermediary’ where these services are provided on his own account. Even where a supplier supplies ITeS to customers of his clients on clients’ behalf, but actually supplies these services on his own account, the supplier will not be categorized as intermediary.
2. The supplier of backend services in India who arranges or facilitates the supply of goods or services or both by the client located abroad to the customers of client, will fall under the ambit of intermediary as these services are merely for arranging or facilitating the supply of goods or services or both between two or more persons.
3. Third Scenario can be where the supplier of ITeS who supplies back end services on his own account during pre-delivery, delivery and post-delivery of supply for and on behalf of the client located abroad. In this case, the supplier is supplying two set of services, namely ITeS and various support services to his client or to the customer of the client. Whether the supplier in this case is an intermediary or not, will depend on the facts and circumstances of each case.

It has also been clarified that supplier of ITeS, who is not an ‘intermediary’ can avail benefits of export of services if he satisfies the criteria mentioned in section 2(6) of the IGST Act. Herein “export of services” means supply of any service where-

• the supplier of service is located in India
• the recipient of service is located outside India
• the place of supply of service is outside India
• the payment for such service has been received by the supplier of service in convertible foreign exchange
• the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8.

Click here to see circular.