The Central Board of Indirect Taxes and Customs (CBIC) has formed a separate category to capture the services provided and received over the internet (without a physical interface between the supplier and the recipient). Sale of digital content like movies, TV shows, music, etc., is an example here.
The Government recognised the need for a separate category for Online Information Database Access and Retrieval (OIDAR) services. These services could be supplied remotely without the supplier having a physical location or presence in India. This needed attention as the remote working format could provide an unfair advantage to service providers located outside India at the cost of Indian service providers providing similar services.
With an intention to widen the tax net and to introduce a level playing field to market participants, the CBIC has introduced specific rules for OIDAR service providers. This article will further discuss the OIDAR services and the Place of Supply for such services.
The IGST Act, 2017 defines OIDAR services as those whose delivery is mediated by information technology, over the internet, or an electronic network. The nature of these services mandates it to be in an automated form and involves minimal human intervention. It is impossible to undertake these services in the absence of information technology and includes electronic services such as:
- Advertising on the internet;
- Providing cloud services;
- Provision of e-books, movie, music, software, and other intangibles through telecommunication networks or the internet;
- Providing data or information, retrievable or otherwise, to any person in electronic form through a computer network;
- Online supplies of digital content (movies, television shows, music, and the like);
- Digital data storage; and
- Online gaming.
Read more about OIDAR services here.
Under the current provisions of GST law, when the service provider and the service recipient are located in India, the place of provision of supply will be the location of the service recipient. In case the service provider is located outside India, and he/she provides services to a GST registered person in India, the service recipient is responsible for paying GST under the reverse charge mechanism.
The issue of taxation arises when the service provider is located outside India, and he/she provides services to an individual consumer located in India. It is unreasonable to expect the individual consumer to remit GST on behalf of the service provider.
In such cases, the IGST Act, 2017 provides that, when online information and database access or retrieval services are provided by any person located in a non-taxable territory and received by a non-taxable recipient, the supplier of services located in the non-taxable territory will be the person liable for paying IGST on such supply of services.
Note: ‘Non-Taxable Recipient’ means:
- Local Authority,
- Governmental Authority,
- Individual, or
- Any other person not registered under GST, who is receiving online information and database access or retrieval services for any purpose other than commerce, industry, or any other business or profession.
Note: The Non-Taxable Recipient’ should be located in a taxable territory (India).
If the services are provided by an intermediary located outside India, the intermediary is responsible for paying IGST unless the intermediary satisfies the following conditions:
- The invoice/customer’s bill/receipt issued by such intermediary clearly identifies the service in question and specifies that the supplier is located in a non-taxable territory.
- The intermediary involved in the supply does not:
- Authorise the charge to the customer nor
- Takes part in its charge.
In other words, the intermediary neither collects nor 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 authorise the delivery.
- The general terms and conditions of the supply are not set by the intermediary involved in the supply. The supplier of services sets these terms.
- CBIC has introduced a simplified registration scheme for OIDAR service providers or intermediaries through Form GST REG-10. The supplier can apply for registration through the Principal Commissioner of Central Tax, Bengaluru (West). If the overseas service provider has a person in India, representing them for any purpose, then, such a person can get themselves registered and pay the tax on behalf of the service provider.
- The overseas OIDAR service provider or its representative must file monthly returns in Form GSTR-5A, within the twentieth day of the succeeding month.
- OIDAR service providers located in India should file their GST returns like other service providers located in India (Form GSTR-1, Form GSTR-3B).