Are India-based back offices of multinationals merely brokers? And, are Indian companies providing services to foreign firms just commission agents? Going by the tax department’s definition, it appears that they are so — and not exporters. Several back offices at multinationals now face 18% Goods and Services Tax (GST) liabilities after a tax body said they are merely intermediaries.
Even Indian companies providing offshore support services to multinationals are liable to pay the 18% GST levy on their revenues. So, services provided by Indian entities to foreign companies would not be treated as exports and hence taxable in India. Currently, taxes are not applied on exports in most situations. In a recent ruling, the Authority of Advance Ruling (AAR) said that back office support services qualify as “intermediary” services and not exports.