Finally, Business Process Outsourcing industry is out of the dilemma that was created by the Government of India (GOI) months ago by issuing the circular that imposed 18 percent GST on Information Technology (IT) as well as Information Technology Enabled Services (ITES) companies which cater broker & intermediary services to foreign clients.
GOI has now reneged the circular that defined BPO services as the supply of services by the broker and not an export.
Under GST circular by the government 
Get to know the latest GST circulars and orders in PDF format as published by CBIC. Here, the taxpayers can read CGST, IGST, and UTGST circulars/orders. Read More on March 18, 2019 brought a large number of BPO-KPO services provider companies under the category of intermediaries and most BPO-KPO services under the category of being taxable.
This implied condemnation by GST authorities to provide a refund of amounts paid on inputs to MNC BPO. In this regard, the clarification by GST authorities was that “the job performed for parent companies can’t be treated as exports and will be considered as a service for the parent company.”
The circular was not only dubious to understand & apply but also raged belligerent scenario as many outsourcing entities and BPO companies started questioning the government’s notification of applying 18% on BPO services and its statutory validity.
BPO-KPO services provider companies were bewildered as to how to categorize back-end services as “support services” (before the delivery, during the delivery, after-delivery of supply and after-sales support) and as “services to arrange or facilitate the delivery of goods or services among two or more individuals”.
Already, the back offices of several BPOs & KPOs were struggling with the margin pressure and the new circular that was announced on18th July 2019 increased the troubles for such corporate entities by defining them as intermediaries and brokers that attract 18% GST on their service.
Read Also: Service Exporters Seek 18% GST Exemption on the Supply to Foreign Companies 
Service exporters serving foreign companies are seeking exemption from 18 per cent Goods and Service Tax (GST) on the supply of service. Read More
In the context of these apprehensions as underlined by many representations submitted to the GOI, CBIC concluded to pull back the respective Circular (vide Circular No. 127/46/2019 – GST dated 04.12.2019).
Government has came up with truce which will be relief for the back-office support providers as now they will not have to issue a Show Cause Notices and they will be eligible to get refunds on the amount paid on inputs which were blocked by the circular due to non-consideration of services as exports and treating it as intermediary services. However, it is very important to discern the lawful significance of drawing back the circular before concluding any future actions.
“There was a spur in the issuance of notices to back-office support providers, post the July Circular. Also, based on a few clarifications in the Circular, GST refund 
Attention GST traders, the govt has updated GST refund mechanism in digital format along with single authority disbursement. Here we showcase all changes in refund forms. Read More were being denied to some service providers on the allegation of being an intermediary. Accordingly, it would be interesting to see the stand tax authorities would adopt on withdrawal of this Circular.” state Harpreet Singh, Partner in KPMG.
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