The confusion that has arisen surrounding the taxation of firms in India’s booming outsourcing industry may lead the Central Board of Direct Taxation to revise a recent circular on the issue.
Whilst delivering her inaugural address to a conference on international tax organised by the Associated Chambers of Commerce and Industry of India (Assocham), Revenue Secretary Ms Vineeta Rai revealed: “The concerns of this industry (BPO) are being considered and a viable solution in accordance with the established principles of international taxation would no doubt emerge.”
Controversy was ignited back in January this year when the CBDT issued a circular indicating that a “considerable portion” of the profits generated by ‘BPOs’ (Business Process Outsourcing firms) would be liable for income tax on earnings which related to the parent company’s core business.
However, it appears that lobbying from the outsourcing industry has prompted the country’s tax authority to rethink its unpopular position, and Ms Rai indicated in the national media that “appropriate decisions” are to be taken in due course.
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