Call Centers Providing Direct Services Are Not Intermediaries CESTAT Ruling Explained
The Central Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that call centers offering direct services to foreign clients are not considered “intermediaries” under Indian service tax law.
This judgment is crucial for BPOs and IT-enabled service exporters who often face service tax disputes despite exporting services and earning in foreign exchange.
Let’s simplify what the judgment means, what the law says, and how it affects your tax position.
What Is an Intermediary Under Service Tax?
As per Rule 2(f) of the Place of Provision of Services Rules, 2012, an intermediary is a person who:
- Arranges or facilitates the supply of goods or services between two or more persons,
- But does not provide the service on their own account.
Example: A broker or agent connecting a buyer and seller.
What Did the CESTAT Say About Call Centers?
Case: [Concentrix Daksh Services India Pvt Ltd vs CCE (2023-TIOL-1136-CESTAT-CHD)]
- The CESTAT Chandigarh Bench held that providing customer support or backend services directly to a foreign client does not amount to intermediary service.
- The key point was direct provision of service to the overseas client, not facilitation between two parties.
Legal Reference:
Rule 6A of Service Tax Rules, 1994 defines export of service, and the case met all conditions:
- Service provided to a foreign entity
- Payment received in convertible foreign exchange
- Service used outside India
Why This Matters for BPOs and Exporters
If your Indian entity:
- Deals directly with the foreign client
- Delivers the service itself
- Gets paid in foreign currency
Then you’re exporting services, not acting as an intermediary.
Intermediary services are taxable in India
Exported services are zero-rated and eligible for refund
CESTAT’s Key Observations
- Contractual clarity matters: If the agreement shows direct service provision to a foreign client, it supports your export claim.
- Nature of service must be backend or support — not matchmaking or facilitation between two other parties.
Expert View: Avoid These Common Mistakes
🔍 “Many exporters lose refunds due to wrongly classifying themselves as intermediaries,” says a senior indirect tax consultant.
Tips to stay compliant:
- Draft clear contracts showing you are the main service provider
- Ensure invoices mention you as the service performer
- Maintain evidence of foreign remittance and usage abroad
Quick Comparison Table
| Aspect | Intermediary Service | Export of Service |
|---|---|---|
| Nature | Facilitates other transactions | Provides service directly |
| Taxability | Taxable in India | Not taxable (zero-rated) |
| Payment | Can be in INR or foreign currency | Must be in convertible foreign exchange |
| Service usage | Within India or outside | Must be used outside India |
Step-by-Step: How to Claim Export Status
- Check your agreement – Is the service rendered directly to a foreign party?
- Invoice carefully – Include foreign client’s details and service nature.
- Receive payment – In convertible foreign exchange.
- File returns – Declare the service as an export in ST-3/GSTR-1.
- Claim refund (if applicable) – Under Rule 5 of Cenvat Credit Rules or CGST Rules (post-GST).
FAQ: Call Centers & Service Tax
Q1. Does this ruling apply post-GST too?
Yes. Though the case is under service tax, similar principles apply under GST due to Rule 2(6) of IGST Rules on export of services.
Q2. Can backend tech support qualify as export?
Yes, if provided directly to a foreign entity and used abroad.
Q3. What if my invoice names an Indian party?
That may break the export chain and reclassify you as an intermediary. Always raise invoices to the foreign recipient.
Final Thoughts
The CESTAT’s ruling provides relief and clarity for India’s booming BPO and service export industry. If your call center provides services directly to a foreign client and meets export conditions, you are not an intermediary under service tax law.
👉 Need help with export classification or GST refunds?
Efiletax can help – Contact us today for expert tax support for BPOs, freelancers, and service exporters.
Summary
Call centers providing direct services to foreign clients are not intermediaries under service tax, rules CESTAT. This means they qualify as exporters and are not liable to pay tax in India, provided they meet export conditions under Rule 6A. Learn how this affects your refund eligibility.