GST touted to be India’s most comprehensive tax reform in decades, is based on the principle of ‘one nation, one market, one tax’. The government has issued a series of notices, circulars, explanations and regulations over the last five years of the GST. The implementation of the Goods and Services Tax (GST) in India has vastly impacted all the business and especially the start-ups. This article summarizes implication of GST on an App developer who is situated outside India but the app is used all over the India.
Relevant Law:
As per Section 2(17) of IGST Act, 2017–
“online information and database access or retrieval services” means 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 and involving minimal human intervention and 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;
Section 13(12) of IGST Act, 2017 –
The place of supply of online information and database access or retrieval services shall be the location of the recipient of services. Explanation.––For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non-contradictory conditions are satisfied, namely:––
(a) the location of address presented by the recipient of services through internet is in the taxable territory;
(b) 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;
(c) the billing address of the recipient of services is in the taxable territory;
(d) the internet protocol address of the device used by the recipient of services is in the taxable territory; (e) the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory;
(f) the country code of the subscriber identity module card used by the recipient of services is of taxable territory;
(g) the location of the fixed land line through which the service is received by the recipient is in the taxable territory.
Section 14 of IGST Act, 2017 –
Special provision for payment of tax by a supplier of online information and database access or retrieval services.–– (1) On supply of online information and database access or retrieval services byany person located in a non-taxable territory and received by a non-taxable online recipient, the supplier of services located in a nontaxable territory shall be the person liable for paying integrated tax on such supply of services:
Provided that in the case of supply of online information and database access or retrieval services by any person located in a non-taxable territory and received by a nontaxable online recipient, an intermediary located in the non-taxable territory, who arranges or facilitates the supply of such services, shall be deemed to be the recipient of such services from the supplier of services in non-taxable territory and supplying such services to the non-taxable online recipient except when such intermediary satisfies the following conditions, namely:––
(a) the invoice or customer‘s bill or receipt issued or made available by such intermediary taking part in the supply clearly identifies the service in question and its supplier in non-taxable territory;
(b) the intermediary involved in the supply does not authorise the charge to the customer or take part in its charge which is that the intermediary neither collects or processes payment in any manner nor is responsible for the payment between the nontaxable online recipient and the supplier of such services; (c) the intermediary involved in the supply does not authorise delivery; and
(d) the general terms and conditions of the supply are not set by the intermediary involved in the supply but by the supplier of services.
(2) The supplier of online information and database access or retrieval services referred to in sub-section (1) shall, for payment of integrated tax, take a single registration under the Simplified Registration Scheme to be notified by the Government:
Provided that any person located in the taxable territory representing such supplier for any purpose in the taxable territory shall get registered and pay integrated tax on behalf of the supplier:
Provided further that if such supplier does not have a physical presence or does not have a representative for any purpose in the taxable territory, he may appoint a person in the taxable territory for the purpose of paying integrated tax and such person shall be liable for payment of such tax.
Analysis
The basic principle is that for any supply to be taxable under GST, the place of supply should be in India. So, in order to determine its taxability in India, we need to determine the place of supply.
a) Application developer is based in India & consumers are also based in India:
This is the simplest of the situations. It’s a domestic supply & thus definitely taxable under GST as the place of supply is in India.
b) Application developer is based in India & consumers are based outside of India:
Since the consumers are based outside of India, selling application would be termed as export of services (provided other conditions of export are met) and it would not be taxable under GST in India. However, GST compliance requirement would still be there, if you are already registered under GST.
c) Application developer is based outside India & consumers are in India:
Again, since the consumers are based in India, place of supply is in India. Here, if the consumer in India is a GST registered person, the supply would attract reverse charge and the registered consumer would be liable to comply the GST. Whereas, if the consumer in India isn’t registered under GST, then GST act lays the responsibility on the application developer, they will be required to take a simplified registration under GST & fulfill the GST compliance.
d) Application developer is based outside India & consumers are also based outside of India:
This is outside the purview of GST.
Conclusion
In the present scenario, application developer is based outside India and the consumers are in India, therefore the place of supply is in India. Therefore, if the consumer in India is a GST registered person, the supply would attract reverse charge and the registered consumer would be liable to comply the GST. Whereas, if the consumer in India isn’t registered under GST, then GST act lays the responsibility on the application developer, they will be required to take a simplified registration under GST & fulfill the GST compliance.
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