BPOs asked to pay tax on ISD calls

By agencies   |   Wednesday, 03 May 2006, 19:30 IST
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NEW DELHI: The Finance Ministry has imposed a 12 percent service tax on services rendered to foreign clients. What's worse, call centers might simply have to absorb the outgo. Until now, services were exempt from service tax if the recipient of the service was located outside India. But the Finance Ministry has amended the Export of Service Rules. Now, the service must be used and delivered outside India if it is to be exempt from the tax. This could cause problems for call centers based in India that serve clients outside India. Tax experts say the move could harm the centers' competitiveness. Industry experts say most call centers sign an annual, fixed-price contract with clients and would simply have to absorb the service tax, without passing it on to customers.

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