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Big relief for BPO industry: Outsourced services won’t attract 18% GST, clarifies govt

Big relief for BPO industry: Outsourced services won’t attract 18% GST, clarifies govt

In a big relief for India's $180 billion back-office sector, the government has clarified that services outsourced to India or carried out in the country for foreign entities will not be treated as intermediary services, and hence not face 18% goods and services tax (GST). This was approved by the GST Council on Friday, the Economic Times mentioned in a report.

The clarification issued by the government will free up hundreds of crores in tax refunds to entities in the information technology (IT), IT-enabled services (ITeS), financial services, and research and development sectors as well as resolve the four-year-old issue that has led to large-scale litigation.

Worth mentioning here is that tax authorities had begun treating back-office services providers, or business process outsourcing (BPO) entities, as intermediaries, denying export status to their services to overseas entities. Exports are zero-rated under GST and not liable to the tax while intermediaries face an 18% charge.

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