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BPOs/KPOs in tax net

According to a notification by the government, companies engaged in backend services related to Information Technology enabled Services (ITeS) will now come under the ambit of 18% tax under the GST regime. These entities engaged in the facilitation of supply of goods/services will henceforth not be considered to be involved in exports. They will now be considered as intermediaries, unless services are being provided on their own account.To clarify the scope of GST, the government has examined some scenarios, wherein a supplier of ITeS located in India supplies services for a client located abroad to ascertain whether it qualifies as an intermediary. With this notification, most of the BPO/KPO services firms can now be treated as intermediaries and be taxed under GST.

Contrary to the industry’s demand, the government has widened the scope of the composition of intermediaries. “It is critical for the Government to ensure that Indian back office support services remain globally competitive and we do not lose out work to other countries. Thus, the tax regime needs to conducive,” opines Mr. Harpreet Singh, Partner in KPMG India.