06.10.2023: 52nd GST Council likely to clarify taxation for co-location or data center services

The 52nd GST Council is likely to clarify taxation woes for co-location services or data center services. According to sources, the council is likely to get in a breather for this sector as it is considering to allow co-location or data center facilities to discharge GST at 18% only if the center is providing a physical space to the overseas client and not giving data storage and maintenance services.

Notably, the 52nd meeting of the GST Council will be held on 7th October, 2023 at Vigyan Bhawan , New Delhi.
“The council is likely to clarify that in case data centers are providing services to overseas customers with respect to storing the data, managing the data then it will be treated as an export. But in case where data centers has a contract only for providing physical space on rent then GST to be applicable at 18%,” sources told CNBC-TV18.
The issue came to the fore considering that a lot of doubts were being shared by the industry. Several multi national leaders who are providing data center services to overseas clients from India had flagged to GST authorities to avoid wrongful payment of taxes. Many companies just rent a space to overseas clients for housing servers and other computing hardware but in many cases centers not just rent a space but also provide services such as hosting and maintaining the information technology (IT) back up.
Experts say that such a clarity was much warranted as payment of GST in this regard was becoming an issue and industry with this clarity can avoid getting into tax troubles.
Source: CNBC TV18

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