Soon, IT firms can claim refund on input tax even if they code outside India

The Goods and Services Tax Council has decided to allow input tax refunds to information technology (IT) firms, even if they code sitting outside the country, a government official in the know told The Economic Times.

“It has been decided that wherever the Reserve Bank of India (RBI) permits, the input tax credit would be allowed,” said the official in the know. The person, who was privy to the deliberations of the GST Council meeting, added that a notification regarding this would be put out soon. 

In a global contract, the Indian IT firm may deliver some part of the service from outside the homeland. But the service will be seen as emanating from India, hence the input tax refund will apply, said another government official.

“Denial of export benefit in case of global contracts by Indian companies would dent competitiveness of these firms, which operate in the global marketplace and earn significant amount of foreign exchange for the country,” MS Mani, partner at accounting firm Deloitte India, told The Economic Times. 

Bipin Sapra, partner at accounting firm EY, told The Economic Times: “In case a service is contractually delivered from India, while partial delivery happens from one of its overseas entity, the condition for export gets fulfilled as long as the location of service provider is considered in India. A clarification in this regard will make this simpler, given that RBI will permit the receipt of foreign exchange depending on the terms of the contract.”