Punjab and Haryana HC issues notice to Centre seeking clarity on classification of BPOs

The High Court of Punjab and Haryana have issued a notice to the Centre seeking clarity on whether Business Process (BPO) units are classified as 'intermediary' or 'exporters' under the GST framework. If BPOs fall under the category of intermediaries, they will not be eligible for any tax refunds. The applicant, a BPO, got a tax refund after assessment of its GST returns on the grounds that it is involved in 'Export of Services'. However, GST authorities approached the First Appellate Authority, Joint Commissioner (Appeal), and secured a stay on the refund, since the AAR ruled that the company was an 'intermediary'. Hence the applicant approached the High Court. Initially, the HC ruled that the First Appellate Authority had relied on a July 2019 circular that had been withdrawn by the Centre.

In a similar case, the Maharashtra AAAR had held that the services including liaising with client's buyers/suppliers with respect to delivery, transportation of goods, and settlement of payment between them went way beyond back-office support services, and as such BPO units were to be classified as 'intermediary' services. The Punjab and Haryana HC is now waiting on a clarification from the Centre.