New Delhi, July 5 : Software consultancy services provided by an IT company under a contract to a company which has foreign clients is liable to pay Goods and Services Tax (GST). In a recent order, Tamil Nadu Authority for Advance Rulings (AAR) for the GST held that 'software consultancy services' provided by applicant under a contract to a company who has foreign clients is a supply of service and applicant is liable to pay GST at appropriate rate. The authority noted that there are two sets of contracts in the instant case, first between applicant, Rajesh Rama Varma and Doyen Systems Pvt. Ltd. for providing professional and consultancy services and the second between Doyen and its client for providing software support services. The applicant provides IT software related consulting services in the area of Oracle ERP with regard to Oracle Financials to Doyen Systems Pvt Ltd for a consultancy fee laid down in the consultancy agreement. Therefore, the said activity satisfies the conditions of Section 7(1)(a) and is a supply under GST, the AAR ruling noted. "As per Para 5 of Schedule II read with Section 7(1A), this supply is a supply of services. Therefore, the applicant is liable to pay GST at appropriate rates on the supply of consultancy services to Doyen," it said. Rajat Mohan, Senior Partner at AMRG & Associates said: "Service providers carrying out indirect export of information technology software related services to overseas business routed through an Indian business would be liable to pay GST at 18 per cent, as the same would be treated as a domestic transaction." "With passage of time the government would have to award tax neutral status of the step down transactions for export of services also on the lines of merchant exporters, as it would bring in efficacy in the structure of cost of capital for the exporters," Mohan said. /IANS