IT firms’ work for international clients may not always attract IGST

Rate this post

Services provided by Indian information-technology (IT), marketing, and consulting companies to foreign clients may not always draw integrated goods and services tax (IGST) if a ruling by the Authority for Advance Rulings’ (AAR’s) Telangana Bench becomes a precedent.




The AAR gave its ruling on a specific case of referral services provided by the Hyderabad-based Center for International Admission and Visas (CIAV) to foreign universities and colleges for admitting Indian students. The company does not have any binding agreement with universities, colleges, or students for guaranteed admission in particular places.
 

The AAR held these services were not intermediary in nature but exports. This meant that these would not draw integrated GST, which intermediary services would have attracted, said Experts

Experts say the ruling may have ramifications for other industries that provide services to foreign clients, particularly in the IT, consulting, marketing, and recruitment sectors.

BONE OF CONTENTION

AAR gave its ruling on a specific case of referral services provided by the Center for International Admission and Visas (CIAV) to foreign universities and colleges  

The AAR held that these services were not intermediary in nature but exports

AAR holds the scope of an “intermediary” did not include a company that supplied services on its own account 

In the particular case, the company gets referral income or commission in foreign currencies from universities and colleges based on admissions.

The AAR holds the scope of an “intermediary” did not include a company that supplied services on its own account. In the present case, the company is under a principal-to-principal contractual relation with the foreign universities and colleges and it is providing its independent and main service of marketing and referral to them.

Besides, the company does not influence the selection process of prospective students to a contracted university, it held.

Experts said the ruling set a precedent for the classification of services under GST.

The decision paves the way for a broader interpretation that could affect various service sectors engaging with foreign clients, he said.

The AAR said services provided to foreign clients on a principal-to-principal basis such as consulting, IT, marketing and recruitment should not always be deemed as intermediary services, according to Experts.

Visit www.cagurujiclasses.com for practical courses




Pooja Gupta

CA Pooja Gupta (CA, ISA, M.com) having 15 years of experience. Educator and Digital Creator

Disclaimer:- The opinions presented are exclusively those of the author and CA Guruji Classes. The material in this piece is intended purely for informational purposes and for individual, non-commercial consumption. It does not constitute expert guidance or an endorsement by any organization. The author, the organization, and its associates are not liable for any form of loss or harm resulting from the information in this article, nor for any decisions made based on it. Furthermore, no segment of this article or newsletter should be employed for any intention unless granted in written form, and we maintain the legal right to address any unauthorized utilization of our article or newsletter.

CA Pooja Gupta (CA, ISA, M.com) having 15 years of experience. Educator and Digital Creator

Leave a Comment