Service exporters serving foreign companies are seeking exemption from 18 per cent Goods and Service Tax (GST) on the supply of service. These agents are quoting clarifications from the government authorized Tax Research Unit (TRU’s) as the base of appeal.
The service providers (specially marking the agents in the technical handle) reached out to Gujarat High Court with accusations of heavy GST levied on outsourcing of their services to foreign companies like sales, marketing or technical support, which comes under the category of exports. Other agents of Indian origin who are operating outside India are exempt from any tax on their services but those providing services from their offices in India are taxed.
Heading towards the case in Gujarat High Court, the Tax Research Unit (working in par with the CBIC) supported the service exporters saying that tax should not be levied on these services. The clarifications are available as office memoranda, in relation to the place of supply rules of agent/intermediary services providers under GST.
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The clarification from the government’s own TRU is now looking for amendments in Section 13 of the Integrated GST Act, which says that the place where the services are offered will be the location of the supplier of services, irrespective of their actual location.
TRUs clarification supporting the exporter genre says that as far as all B2B (business to business) transactions of services are concerned, the place of supply, which is also the location of the supplier or the location of the recipient of services, is looked after by section 13(8) which may soon be amended to only the location of service recipient.
Abhishek Rastogi (partner at Khaitan and Co), who is currently arguing the case in the Court, said that the place of provision for intermediary services makes transactions taxable even when the recipient is operating from anywhere outside India and payment is received in foreign exchange.
“The situation is a tough one for Indian Service Providers/Exporters, so if they start supplying services from their offices outside India they can save up to 18 per cent GST”. Rastogi said.
