Software program providers to Indian agency’s abroad shopper: AAR

Corporations offering data know-how software program associated providers to abroad shopper of an AAR Indian enterprise can be liable to pay 18 per cent GST, the Authority of Advance Ruling (AAR) has mentioned.

A agency engaged within the enterprise of offering software program associated consultancy providers in Oracle ERP approached the Tamil Nadu bench of the AAR looking for ruling on whether or not the providers supplied by it to international shopper of a GST-registered IT firm, Doyen Techniques, shall be handled as export of providers.

Within the mentioned case, the unique contract was between Doyen Techniques and the US shopper, and part of the service was contracted to the applicant agency, who can be paid consultancy price for his providers.

The applicant had entered into settlement with Doyen Techniques.

The international shopper was to pay consideration to Indian IT firm and as per independently agreed upon contract worth, which had no relevance/reference to contract between Doyen Techniques and the applicant.

Applicant was of the view that he immediately rendered the service to international shopper and was paid consideration by Doyen Techniques on behalf of international firm.

The AAR whereas passing its ruling mentioned there are two units of contract — one between applicant and Doyen Techniques for offering skilled and consultancy providers, and second between Doyen Techniques and its international shopper for offering software program help providers.

The applicant isn’t celebration to the second contract.

AAR noticed that applicant’s rivalry of being an agent to Doyen Techniques can’t be substantiated merely as a result of the applicant is in e-mail correspondence with the workers of international purchasers of the Indian firm.

It does not imply that he’s ‘carrying on the enterprise of provide of providers’ on behalf of firm as required below definition of agent.

The AAR mentioned that the applicant supplies providers as a ‘Marketing consultant’ engaged by Doyen Techniques’.

“The providers supplied by the applicant to Doyen Techniques Pvt Ltd is a provide of providers below CGST/TNGST Act and the applicant is liable to pay related tax on such provide,” the AAR mentioned.

AMRG & Associates Senior Associate Rajat Mohan mentioned the Authority has dominated that taxpayers offering data know-how software program associated providers to abroad shopper of an Indian enterprise can be liable to pay GST on the charge of 18 per cent.

“The Authorities ought to ponder and cross on a tax impartial standing to providers sector for all oblique exports, because the procedural legislation has matured and know-how is secure after three years of implementation. With this tweaking, GST would transfer to section II of ‘Ease of Doing Enterprise’, whereby general value of capital in IT providers sector may very well be additional rationalised,” Mohan added.

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