OIDAR services under GST Laws – A Complicated Compliance
In today’s ever booming digital world, we prefer online platforms for books, movies, music, data storage, advertising etc. With the increasing use of cloud based services, it is all the more important to know the taxability of GST on Online Information Database Access and Retrieval Services (OIDAR).
Section 2(17) of IGST Act, 2017 defines OIDAR as services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated involving minimal human intervention and impossible to ensure in the absence of information technology. The definition is divided in two parts one is ‘service is provided online via electronic network’ and second important thing is, ‘it is impossible to ensure in the absence of information technology’. It includes electronic services such as advertising on internet, cloud services, e-books, movie, digital data storage, etc. However, services like PDF document manually emailed by provider, online course consisting of pre-recorded videos and downloadable PDFs plus support from live tutor are not considered as OIDAR services. This is due to the fact that these documents or lectures are not solely provided through automated information technology. It can be concluded that the transaction must fulfill both the conditions mentioned in the definition as discussed above to qualify as OIDAR service under GST laws.
Now let’s talk about registration requirement of person supplying online information and data base access or retrieval services. If such person is within India and recipient of services is also within India then normal registration rules will apply. However, if such person is providing services from a place outside India to a person in India, other than registered person then he is required to take compulsory registration under section 24(xi) of CGST Act, 2017. Such suppliers (or intermediaries) of OIDAR services shall take a single registration under the Simplified Registration Scheme in Form GST REG-10. In case such supplier has a representative in India then he shall pay IGST on former’s behalf and if does not have any representative in India, then such supplier can appoint a person in India and he will be liable for payment of such tax in India. ‘Notification No. 2/2017 – Integrated Tax, dated 19th June 2017’ has notified Principal Commissioner of Central Tax, Bengaluru (West) to grant registration in such cases.
As we know, for any supply to be taxable under GST, the place of supply should be in India. Thus, following cases are possible for deciding taxability of OIDAR services:
Location of Supplier of service
Location of recipient of service
Forward Charge/ Reverse Charge
Recipient: Registered Person
Recipient: Non Taxable Person
|India||Outside India||No (as it export of service)||NA|
|Outside India||Outside India||No (not covered under GST)||NA|
However, if an intermediary sitting in Non-taxable territory is providing OIDAR services in India and they are representing themselves as provider/facilitator or arranges for supplying of OIDAR services to non- taxable online recipient, then such intermediary will be considered as Service Provider and will comply with the GST laws of India. However, there are some exceptions being provided for intermediaries, namely
- The invoice or customer’s bill or receipt issued by such intermediary clearly identifies the service in question and its supplier in non-taxable territory.
- The intermediary neither collects or processes payment in any manner nor is responsible for the payment between the non-taxable online recipient and the supplier of such services.
- The intermediary involved in the supply does not authorize delivery.
- The general terms and conditions of the supply are not set by the intermediary involved in the supply but by the supplier of services.
Now the question is how to identify the receivers and suppliers of OIDAR services in India and who are receiving such services within India and who are supplying such services from abroad? Let’s answer one by one. Sec 13(12) of IGST Act, states that place of supply of online information and database access or retrieval services shall be the location of the recipient of services. In order to check whether the person receiving such services is a person of Indian origin and is located in taxable territory, any two of the following non contradictory conditions should be satisfied, namely-
- Location of address of recipient provided by him through internet is in the taxable territory;
- the credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory;
- the billing address of the recipient of services is in the taxable territory;
- the internet protocol address of the device used by the recipient of services is in the taxable territory;
- the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory;
- the country code of the subscriber identity module card used by the recipient of services is of taxable territory;
- the location of the fixed land line through which the service is received by the recipient is in the taxable territory.
Now how the supplier sitting outside India will be identified? Why he will take botheration of taking registration, filing returns and paying taxes in India? The answer to this is every country has its own laws for Information Technology and related services. Every country has rights to provide/block access to a particular website or any other medium through which these services are provided. But is the Government of India closely monitoring all those websites who are earning huge revenues from Indian customers? Is there any mechanism which can identify such service providers? And in case they don’t comply with the obligations and compliances of the country, what are the penal consequences of the same. If the answer to these questions is yes and that such suppliers can be identified by the government then in order to safeguard their business in India, they will have to do all the compliances as per the law in order to prevent their websites from being blocked by the Indian Government.