Almost every one of us uses some or the other application in our daily life which are developed by application developers and made available to the end users through online stores such as Play store. Now, an important question that might & should arise in the minds of the application developers that whether they are liable to register under GST & what do they need to do to be compliant with the GST laws. This is what this article is about, we will discuss the following:
Page Contents
- 1) How would the transaction of selling the application be treated provided the fact that application can be sold within India & worldwide?
- 2) Whether applications sold on online platform are taxable under GST?
- 3) Do application developers need GST registration?
- 4) What is the responsibility of application developers with respect to GST?
- 5) What other services can be treated the same way?
1) How would the transaction of selling the application be treated provided the fact that application can be sold within India & worldwide?
So, to start with, basically the transaction of selling applications online on an electronic store seems very similar to selling anything on the electronic market. But, the most important thing, which makes this transaction different is, since the product is an intangible product, it can be sold anywhere from anywhere around the globe, it doesn’t need any physical delivery. Internet is used as a medium, such kind of supply is categorized as OIDAR (Online Information Database Access and Retrieval) Services under GST.
2) Whether applications sold on online platform are taxable under GST?
To answer this, we could lay upon a basic principle which is, 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 also 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.
3) Do application developers need GST registration?
Now, that we have discussed the taxability already, it would be easier for us to understand whether GST registration is required or not.
a) Application developer is based in India & consumers are also based in India:
Since you are a supplier of OIDAR services in India to Indian consumers, GST registration is required (threshold turnover exemption isn’t available).
b) Application developer is based in India & consumers are also based outside of India:
Since your consumers are based out of India, you are an exporter of services (provided other conditions of export are met), you would be required to take registration under GST if your turnover crosses Rs 20 lakhs.
c) Application developer is based outside India & consumers are in India:
You need a GST registration under simplified GST registration scheme in form GST REG-10.
d) Application developer is based outside India & consumers are also based outside of India:
You do not need a GST registration.
4) What is the responsibility of application developers with respect to GST?
We now understand that we need GST registration in case a, b & c as discussed in previous points. Now, let’s take a look at the responsibility as GST registered person.
a) Application developer is based in India & consumers are also based in India:
The responsibility would be same as any other seller in India. You are required to charge GST on the applications sold by you, issue tax invoice, discharge your tax liability every month & file periodical GST returns. Likewise, you could also claim eligible Input tax credit on expenses or procurements made by you in furtherance of business.
b) Application developer is based in India & consumers are also based outside of India:
The foremost responsibility that you have here is to determine if you meet all the conditions to conclude the supply as an export.
Practically, the most important condition that might not be met is “that you must receive payments from consumers in foreign exchange”. If this condition isn’t met, it wouldn’t be export of service & you would be required to comply as if you made a local supply.
If conditions are met & it is concluded that supply is export of services, then you are not required to charge GST, though you would be required to file GST returns reporting export of services. Such provision of export of services can be made with or without payment of taxes (which would require LUT) You can claim ITC on expenses or procurements made by you in furtherance of business & this can be claimed as refund.
c) Application developer is based outside India & consumers are in India:
You are required to take GST registration under simplified scheme and will be responsible to pay IGST & file return in form GSTR-5A every month.
d) Application developer is based outside India & consumers are also based outside of India:
This is outside the purview of GST.
5) What other services can be treated the same way?
Though, in this article, we have laid emphasis on applications sold through play store. Similar treatment can be applied to other OIDAR services. Following is an illustrative list of such services:
(i) providing cloud services
(ii) provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet
(iii) providing data or information, retrievable or otherwise in electronic form through a computer network
(iv) online supplies of digital content (movies, television shows, music and the like)
(v) digital data storage
(vi) Supply of software and updating thereof
(vii) Supply of distance teaching
(viii) Website supply, web-hosting, distance maintenance of programmes and equipment
(ix) online gaming.
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Disclaimer: The above post is only for the purpose of academic discussion and should not be construed as any legal opinion in any matter whatsoever.
The author is a CA in practice at Delhi and can be contacted at: E-mail: [email protected], Mobile: +91-9811741451
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Nice article, informative, thanks