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The government of India has informed that it has provided relief to the information technology and IT-enabled services (ITeS) sector by eliminating a tax demand of INR 10,000 crore slapped on companies.

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But experts believe that this may not be the end of the matter as the resolution would only take place at the adjudication level and tax officials could make more such demands. 

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The service tax department earlier asked about 200 companies to return export benefits availed during 2012-2016 on software offered to clients outside of  India, and shell out a 15 percent service tax along with fine.. 

The government's announcement regarding the waiver has made IT industry association Nasscom along with other companies that were slapped with the demand notices rejoice, tax experts, however, believe that the issue could return to torment them.

"This clarification is not a relief for IT/ ITeS companies. It will, in turn, encourage more tax officers to issue such notices as it (clarification) specifically mentions that the matter would only be resolved subsequently at the adjudication level," says  Sachin Menon, national head, indirect tax, KPMG India. 

"I would have expected the department to clarify its stand on the issue raised in the show cause notice and instruct the field formations to adjudicate dropping the demand immediately. The issue will continue to haunt IT/ITeS companies even under the GST regime where they have to predeposit about 10% of the amount demanded by the tax authorities, for admitting an appeal," added Menon.

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