0.42 Million of Tax Credit on Exports not availed by the Client

Background: Client was engaged in the business of providing analytic solutions to US clients. The business was completely people driven.

In the process of providing the services, the client used to incur a lot of expenses locally like telephone, consultant, travel, internet, and technical fees on which it paid taxes. We were called in to study whether all the tax benefits applicable to business were taken or not.

What We Did: As a process, we listed down all the tax benefits relevant to the client by segregating various cost and the related revenue. Almost 100% of the business was international; such services would typically qualify as export of services. When you export a service, you do not have to pay tax. This resulted in non-utilization of the tax credit which was paid on using services like telephone, travel, and internet. Since the tax credit was not utilized, our client could claim for the refund for taxes and increase their profits.

Results: To our surprise, the client had not claimed for the refund of taxes. When we inquired, client responded that they were not aware of such provision. Then we organized all the information, and guided the client to apply for the refund of taxes. The net result of this exercise resulted in the savings to the tune of INR 0.42 million. In our estimate, going forward client would be saving close to 0.55-0.60 million on year to year basis.