Circular clarifying GST impact on transactions related to outsourcing of IT enabled services by overseas entities


Central Board of Indirect Tax & Customs (CBIC) issued circular no. 20/06/03/2019-GST dated 18th July, 2019 clarifying implications under GST related to Information Technology enabled services (ITes) outsourced to Indian entities by overseas companies (i.e. call centres, business process outsourcing service, accounts outsourcing service etc.). The said circular clarifies that the definition of “intermediary” u/s. 2(13) of IGST Act inter alia provides specific exclusion of a person i.e. that of a person who supplies such goods or services or both or securities on his own accountTherefore, the supplier of services would not be treated as “intermediary” even where the supplier of services qualifies to be “an agent/ broker or any other person” if he is involved in the supply of service on his own account.

The circular mentions that IT enabled services have not been defined under GST Act however, the same has been defined as below under sub-rule (e) of rule 10A of Income Tax Rules, 1962 pertaining to Safe Harbour rules for international transactions;

“information technology enabled services” means the following business process outsourcing services provided mainly with the assistance or use of information technology, namely;

(i) back office operations;

(ii) call centers or contact center services;

(iii) data processing and data mining;

(iv) insurance claim processing;

(v) legal databases;

(vi) creation and maintenance of medical transcription excluding medical advice;  

(vii) translation services;

(viii) payroll;

(ix) remote maintenance;

(x) revenue accounting;

(xi) support centers;

(xii) website services;

(xiii) data search integration and analysis;

(xiv) remote education excluding education content development; or

(xv) clinical database management services excluding clinical trials,

but does not include any research and development services whether or not in the nature of contract research and development services.

Implications under GST shall be as below;

  • Where the supplier provides services as listed above to his clients or customers of his clients on his own account, the supplier will not be categorized as “intermediary” and hence the supplier can avail the benefits of export of services under GST subject to compliance with the criteria mentioned in section 2(6) of IGST Act.
  • Where the supplier arranges or facilitates the supply of goods or back-end services or both which include support services, services provided during pre-delivery, delivery and post-delivery of supply (such as order placement and delivery and logistical support, obtaining relevant government clearances, transportation of goods, post-sales support and other services etc.), the supplier will fall under the ambit of “intermediary” under section 2(13) of IGST Act. Hence, the services provided by the supplier will be not qualify as export of service under GST.
  • Where the supplier provides back-end services on his own account along with arranging or facilitating the supply of various support services as listed above, whether the supplier will fall under the ambit of “intermediary” under section 2(13) of IGST Act will depend on facts and circumstances of each case and would be determined keeping in view which set of services is the principal/ main supply.


As can be seen from the aforesaid analysis that the deciding factor to qualify service provider as “intermediary” depends on the fact whether the service provider is providing services on his own or arranges/facilitates the sameIf the service provider falls within the ambit of “intermediary”, he will not be eligible to claim the benefit of export of services under GST. As such there is very thin line of difference in deciding factors to determine whether the service provider is providing services for the client and customers of client on his own or arranges the same. Hence, it should be decided very judiciously after considering all the underlying facts and especially terms of the contract executed between the service provider and the overseas company.

According to the views of the author, few of the deciding factors in determining whether the service provided by the service provider on his own or as a facilitator could be;

  • Whether the service provider provides exclusive service to the client or provide similar service to more than one client
  • Contractual arrangements between the service provider and the client viz. whether the fees payable to the supplier of service depends on reimbursement of cost incurred for the people employed by the supplier of service or fixed in nature depending on nature of service
  • Responsibility casted on the supplier of service as regards deliverance/ performance
  • Whether the services are provided by the service provider independently or jointly along with the team of overseas client
  • Whether the service provider is independent to take all the necessary decisions as regards the performance of service or not

Mehul Shah
Mehul Shah
Chartered Accountant | Blogger | Avid Traveller | Startup Consultant CA Mehul Shah is partner at Rasesh Shah & Co. and can be reached at [email protected]

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