Dated 13th December, 2019

 Subsequent judgment of the Apex Court cannot be used to re-open assessment or disturb past assessment which have been concluded-Department cannot be authorised to re-open the assessment, which stood closed on the basis of the law as it stood at the relevant time.

CBIC withdraws Circular on the scope of information technology-enabled services (ITeS) 1


Introduction

The Central Board of Indirect Taxes (“CBIC”) had issued a circular on the scope of information technology-enabled services (ITeS) and coverage under intermediary services.The circular clarified in relation to various doubts related to supply of Information Technology enabled Services (ITeS) under GST. The said circular had created confusion, leaving an onus on ITeS service providers self-assessing on whether they qualified as an intermediary. The circular was issued on account of various applicationsreceived seeking clarification on issues related to supply of ITeS such as call centre, business process outsourcing services, Intermediary Services to overseas entities under GST law and qualification of the same as “export of services” or not, etc. The circular led to a series of notices being issued on ITeS firms.The circular had created a lot of upheaval in the back-office/IT services industry. Also, a lot of GST refunds were held up by the tax authorities, on account of services qualifying as ‘intermediary’ and not exports.

CBIC decision to withdraw the circular

Numerous representations were received expressing apprehensions on the implications of the said Circular. In view of these apprehensions and to ensure uniformity in the implementation of the provisions of the law across field formations, CBIC, in exercise of its powers conferred by section 168(1) of the Central Goods and Services Tax Act, 2017 withdraws the Circular .

Our Comments

The withdrawal should come as a relief to IT/ITeS (IT-enabled services) firms and back-office support service providers. The latest move might provide respite to the industry, to the extent that the authorities were placing reliance on the erstwhile circular to issue show cause notices to back-office support provider. A revised circular is expected to be issued on the subject at the earliest to avoid unwarranted litigation

1 No.127/46/2019 dated 04.12.2019

1 Circular No. 107/26/2019-GST

1 Circular No. 107/26/2019-GST


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Founder Member

Bhaskar Thakkar

Chief Executive officer

BT Associates, India

thakkar@btassociate.com

Twenty years of experience in tax practice. Specialist in structuring & planning and tax optimization under indirect tax. Lead eastern India indirect tax practice of Ernst & Young in past.