Govt steps to resolve Rs 10,000 cr tax googly for IT, ITeS firms.

The government on Thursday rushed to resolve the tax issues faced by about 200 information technology and ITenabled services companies who were asked to pay a total of Rs 10,000 crore in taxes. The Central Board of Excise and Customs (CBEC) has asked indirect tax commissioners to prepare a detailed report on “place of supply” provisions and names of companies impacted by this. 

“The intention is to look in to the matter and resolve it as fast as possible,” a tax official told ET over the phone. “CBEC will study the report sent by senior tax officials and come out with the necessary action soon,” he said. 

This comes a day after ET on Wednesday reported that IT, ITeS companies jittery over Rs 10,000-crore tax demands. Many software companies also reached out to ET on Thursday. 

“The tax department has raised ?28 crore demand on our company for the same and we are looking to approach the tribunal soon,” the company’s director told ET. He added that it’s not just the IT and ITeS companies who were served with such notices but also some other companies too have received similar tax demands. 

Another senior tax official said that many IT and ITeS companies were reached out on Wednesday and given an assurance that the government would look in to the matter immediately. The tax department has raised service tax demands on the software companies claiming that the emails that they receive from their clients or parent company are goods. And hence the place of supply of service they provide (maintenance or supplying patches, etc) is India. 

The service tax department in the notices asked the companies to return export benefits claimed in the past five years (2012-2016) on software provided to clients outside India, and has additionally sought 15% service tax along with fines, according to people in the know.

ET had reported that as per the notices supplying software to clients outside India does not tantamount to exports for IT and ITeS companies. This is mainly because the client sends specific details of what it wants in the exported software to Indian IT firms through an email.