New Delhi: Call centres have received a call they are unlikely to take with a smile. The Finance Ministry has imposed a 12 per cent service tax on services rendered to foreign clients. What's worse, call centres 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 centres based in India that serve clients outside India. Tax experts say the move could harm the centres' competitiveness.
Managing Partner at Economic Laws Practice, Rohan Shah says, "Call centres are already working at low margins. To now impose a 12 per cent service tax on them would hurt them badly."
Industry experts say most call centres sign an annual, fixed-price contract with clients and would simply have to absorb the service tax, without passing it on to customers.
Experts also say that other industries like clinical research organisations and commission agents too could come under the service tax net.
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