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Understanding OIDAR
Services Under GST
The digital landscape has
revolutionized the way services are delivered, giving rise to a unique category
known as Online Information Database Access and Retrieval (OIDAR) services.
These services fall under specific tax regulations within the Goods and Services
Tax (GST) framework in India. This article provides an in-depth understanding
of OIDAR services, their tax implications, and compliance requirements, making
it easier for readers to grasp this complex topic.
What Are OIDAR Services?
OIDAR services, defined
under Section 2(17) of the Integrated Goods and Services Tax (IGST) Act, 2017,
are those services whose delivery is mediated by information technology over
the internet or an electronic network and the nature of which renders their
supply impossible to ensure in the absence of information technology and
includes electronic services such as,-
(i) advertising on the
internet;
(ii) providing cloud
services;
(iii) provision of
e-books, movie, music, software and other intangibles through telecommunication
networks or internet;
(iv) providing data or
information, retrievable or otherwise, to any person in electronic form through
a computer network;
(v) online supplies of
digital content (movies, television shows, music and the like);
(vi) digital data
storage; and
(vii) online gaming,
excluding the online money gaming as defined in clause (80B) of section 2 of
the Central Goods and Services Tax Act, 2017;
Taxability of OIDAR
Services
The GST framework for
OIDAR services is designed to address the complexities of digital service
delivery. The primary factor in determining taxability is the location of the
service recipient.
1. Recipient
in India: If the recipient is located in India, the place of
supply is considered to be in India, making the services taxable under GST.
2. Reverse
Charge Mechanism (RCM): When the service provider is
outside India and the recipient is a registered entity in India, the recipient
is responsible for paying GST under RCM. This mechanism ensures that imported
services are taxed appropriately.
3. Forward
Charge Basis: If both the service provider and
recipient are in India, GST is paid by the provider. Similarly, if the provider
is outside India and the recipient is an unregistered individual in India, GST
is charged on a forward charge basis.
Recent Changes and Their
Implications
As of October 1, 2023,
the Indian government has removed the GST exemption for overseas OIDAR service
providers. This change impacts major international companies like Facebook,
Google, and various edtech platforms, which now have to pay an 18% integrated
GST on services provided to individuals and the government in India being in
capacity of NTOR (Non-Taxable Online Recipient). Until this recent
change, OIDAR services provided by overseas companies to the Indian central
government, state governments, government authorities, or individuals for
non-business purposes were exempt from taxation.
This amendment aims to
create a fair competitive environment for domestic service providers and
capitalize on the expanding digital economy for revenue generation.
|
Service
Provider
|
Service
Recipient
|
Taxability
|
|
Before
01-10-2023
|
After
01-10-2023
|
|
Foreign
Providers
|
Non-Taxable
Online Recipient
|
Exempted
|
Taxable
|
|
Domestic
Providers
|
Non-Taxable
Online Recipient
|
Taxable
|
Taxable
|
As per 2 (16) of the IGST
act , NTOR means any
• Government
• Government authority
• Local authority
• An individual
• Or any other person not registered
AND Receiving OIDAR
services in relation to any purpose other than commerce ,industry or any
business or profession located in taxable territory
In simpler terms, if the
government or an unregistered person uses OIDAR services for personal purposes,
they are classified as NTOR. When OIDAR services are received by
an NTOR from a service provider located in a non-taxable territory, the service
provider is liable to pay GST.
Compliance Requirements
for OIDAR Service Providers
Both domestic and foreign
OIDAR service providers must meet certain GST compliance obligations:
1. Registration:
o Domestic
Providers: Must register for GST through the regular procedure
on the GST portal.
o Foreign
Providers: Those supplying services to Indian residents must
register using Form GST REG-10 and appoint a representative in India to manage
compliance, including return filings and tax payments.
2. GST
Returns:
o Domestic
Providers: Required to file regular GST returns (GSTR-1,
GSTR-2, GSTR-3, and annual returns) like other taxpayers.
o Foreign
Providers: Must file Form GSTR-5A by the 20th of each month,
detailing taxable supplies, interest, penalties, and total amounts paid.
Applicability of Dynamic
Quick Response (QR) Code on B2C invoices
Notification No.
14/2020-Central Tax, dated 21st March 2020 had been issued which requires
Dynamic QR Code on B2C invoice issued by taxpayers having aggregate turnover
more than 500 crore rupees, w.e.f. 01.12.2020. However,
the said notification is not applicable to OIDAR supplies made by any
registered person, who has obtained registration under
section 14 of the IGST Act 2017, to an unregistered person.
As regards the supplies
made for exports, though such supplies are made by a registered person to an
unregistered person, however, as e-invoices are required to be issued in
respect of supplies for exports, in terms of Notification no.
13/2020-Central Tax, dated 21st March, 2020 treating them as Business to
Business (B2B) supplies, Notification no. 14/2020- Central Tax, dated 21st
March, 2020 will not be applicable to them.
(Circular no. 146/02/2021-GST dated 23-02-2021)
The requirement for
dynamic QR codes on B2C invoices, initially set to go live on October 1, 2020,
was deferred to December 1, 2020, by GST Notification 71/2020-Central Tax,
dated September 30, 2020. Furthermore, GST Notification 89/2020-Central Tax,
dated November 29, 2020, waived the penalty for non-compliance with dynamic QR
codes on B2C transactions from December 1, 2020, to March 31, 2021, provided
compliance was achieved from April 1, 2021. This waiver was extended until June
30, 2021, with the condition of compliance from July 1, 2021, as per GST
Notification 06/2021, dated March 30, 2021
Conclusion
OIDAR services play a
pivotal role in the digital economy, and their taxation under GST reflects the
need to regulate and tax these services effectively. Understanding the
definitions, taxability criteria, and compliance requirements helps ensure
businesses and individuals meet their GST obligations, promoting a fair market
environment.
Disclaimer: All the
Information is based on the notification, circular and order issued by the
Govt. authority and judgement delivered by the court or the
authority information is strictly for educational purposes and on the
basis of our best understanding of laws & not binding on anyone.
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