GST to be levied on software consulting services provided to foreign customers of Indian companies

The Advance Ruling Authority (AAR) has said that companies providing information technology software-related services to foreign customers of an Indian company will attract Goods and Services Tax (GST) at the speed of 18 percent. a corporation related to the business of providing software-related consulting services at Oracle ERP had asked the Tamil Nadu bench of AAR about the applicable tax regime. the corporate had asked whether the service rendered by it to foreign customers of GST-registered company Doyen Systems would be considered as ‘export of service’. the first accept the said case was between Doyen Systems and one among its American customers.

The applicant company was given a contract for a neighbourhood of the service and had to pay consultancy fees reciprocally. The applicant company had engaged with Doyen Systems during this regard. The applicant company believed that since the foreign customer was directly paying Doyen Systems, it had no role within the agreement between the service provider and Doyen Systems.

The AAR said in its order that two sorts of agreements are reached within the case. the primary was between the applicant company and Doyen Systems for providing professional and consulting services and therefore the second was between the foreign company and Doyen Systems for providing software-related services.

The AAR stated that the applicant company served Doyen Systems as a consultant and intrinsically, “the services provided by the applicant to Doyen Systems would be treated as ‘supply of service’ under the Central GST and Tamil Nadu GST Act”. Hence, the applicant will need to pay tax on such supply of service. ”The authority has ruled that Indian companies providing information technology software-related services to foreign customers of Indian companies, said Rajat Mohan, Senior Partner, AMRG & Associates. Taxpayers are going to be liable for paying GST at a speed of 18 percent. He said that the govt should consider a tax neutral position in the service sector for all indirect exports.