Call Center In India - Call Center Industry in India
Thursday, September 30, 2004
 
Call Center Industry breathes relief : Govt. scraps Controversial CBDT Circular
Date: 30th September 2004


In a major relief to the country's Call Center Industry, Government today exempted it from tax by withdrawing the controversial CBDT circular issued in January.

The withdrawal of the circular follows representations from NASSCOM and industry that the controversial January 2nd circular imposing taxes on
Call Center Industry would strangulate the largest and most promising Call Center Industry that earns over 10 billion dollar of foreign exchange annually.

This circular earlier sent out by the Central Board of Direct Taxes (CBDT) on the taxation of Call Centers in the country had been a cause for concern in certain sections of the Call Center industry. Company officials have been holding teleconferences with tax experts throughout the day after reading about the challenging circular. The circular does remove some of the old problems; but introduced several more complications, including the concept of independent and dependent agent for the first time.

The latest definition would bring domestic Call Centers into the purview of taxation. Till now, Call Centers like Daksh, Spectra mind and WNS were exempt from taxation. This means adverse effects on brand new start-ups or newly-set up Call Centers as they typically start with only one client. The circular also introduces a new term called “habitual conclusion of contracts as the basis for taxation.”

Thus, if a Call Center is involved in all the processes — from marketing to the conclusion of a sales contract in India — it would be liable for paying taxes in the country. International Call Centers with captive units like Dell, HSBC Accenture and Convergys could become liable to pay taxes.

The circular envisages that even if the Call Centers follow an arms length policy of reporting revenues and taxation, they would not be exempt from taxation. The
Call Center industry had been expecting the circular to give them a tax holiday if they follow the norms and principles of transfer pricing, while reporting their revenues in India.
Priyanka.S.

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