Internet Services are best way of modern life to manage home work, office work and business task. Now days internet services are easy way of entertainment in our daily life. An internet service makes our life comfortable and occupies an important place to solve our problem with free access to various website. OIDAR Service is a category of Services provided through the medium of internet and received by the recipient online without having any physical interface with the supplier of such services. OIDAR services implies down load of an e-book online for a payment would amount to receipt of OIDAR Services by the consumer.
The GST law makers have incorporated OIDAR services under GST law on the basis of the provision of OIDAR Services was available in erstwhile Service Tax law.
OIDAR Services in Pre-GST regime:
OIDAR Services was brought under scope of Service Tax w.e.f.16-7-2001, clarified by CBEC that only services using the internet, or some electronic means of communication, just to communicate or facilitate outcome of service does not always mean that a business is providing OIDAR services and it covers services which are automatically delivered over the internet, or an electronic network, where there is minimal or no human intervention. In practice, this can be either:
(i) where the provision of the digital content is entirely automatic e.g., a consumer clicks the ‘Buy Now’ button on a website and either:
(ii) where the provision of the digital content is essentially automatic and the small amount of manual process involved doesn’t change the nature of the supply from an OIDAR service. All electronic services’ that are provided in the ways outlined above are OIDAR services.
Services not cover as OIDAR services:
(i) Supplies of goods, where the order and processing is done electronically
(ii) Supplies of physical books, newsletters, newspapers or journals
(iii) Services of lawyers and financial consultants who advise clients through email
(iv) Booking services or tickets to entertainment events, hotel accommodation or car hire
(v) Educational or professional courses, where the content is delivered by a teacher over the intent or an electronic network ( in other words, using a remote link)
(vi) Offline physical repair services of computer equipment
(vii) Advertising services in newspapers, on posters and television
Taxability of OIDAR services:
Till November 30 ,2016 In case of B2B OIDAR services received from outside India from abroad were taxable under reverse charge, the recipient ( who is already registered under the service tax law in India) has to pay service tax on import of services. Service tax paid entitled for input credit. Whereas B2C import of OIDAR services was exempted from the payment of service tax.
From December 1, 2016 with the change of Service Tax Rules and amended of provision of OIDAR services. Thereby, exemption from payment of Service Tax on import of services by B2C OIDAR services has been withdrawn and B2C OIDAR services was made taxable in the hands of the service provider, the supply of OIDAR service from service provider outside India to an Indian non-business individual or government, the overseas service provider has to pay service tax under ‘Forward Charge’ and obtain registration to comply with the provisions of filing returns but no input credit of service tax is available.
Definition of OIDAR Services in GST:
Section 2 (17) of the IGST Act, 2017 has defined “online information and database access or retrieval services” means services whose delivery is medicated 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.
Taxability of OIDAR Services under GST:
Supply is the taxable event in GST. The place of supply determines the taxability of the person. Section 13(12) of the IGST Act, provides with the “place of supply” in respect of OIDAR Services. The place of supply of OIDAR Services shall be the location of the recipient of services. When both the supplier of OIDAR Service and the recipient of such service is in India the place of supply would be the location of the recipient of service. When the supplier of service is located outside India and the recipient is located in India, the place of supply will be India and transaction would be amenable to tax.
Persons liable to pay tax under GST for OIDAR Services:
(i) In case where the supplier of such services is located outside India and the recipient is a business entity (registered person) located in India, the reverse charge mechanism would get triggered and the recipient in India (registered entity under GST) will be liable to pay GST under reverse charge and undertake necessary compliances.
(ii) If the supplier is located outside India and the recipient in India is an individual consumer, in such cases also, the place of supply would be India and the transaction is amenable to levy of GST.
(iii) In case on supply of online information and database access or retrieval services by any person located in a non-taxable territory and received by a non-taxable online recipient, the supplier of services located in a non-taxable territory shall be the person liable for paying integrated tax on such supply of services.
(iv) If an intermediary located outside India arranges or facilities supply of such service to a non-taxable online recipient in India, the intermediary would be treated as the supplier of the said service, except when the intermediary satisfies the following conditions:
(a) The invoice or customer’s bill or receipt issued by such intermediary taking part in the supply clearly identifies the service in question and its supplier in non-taxable territory.
(b) 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.
(c) The intermediary involved in the supply does not authorities delivery.
(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.
Registration of OIDAR Service Provider:
Section 24 of the CGST Act, prescribed that every person supplying online information and data base access or retrieval services from a place outside India to a person in India.
Section 14(2) of the IGST Act, prescribed for simplified procedure of registration, the supplier (or intermediary) of online information and database access or retrieval services shall, for payment of integrated tax, take a single registration in Form GST REG-10. The supplier shall take registration at principal Commissioner of Central Tax, Bangaluru West who has been the designated for grant registration in such cases.
In case there is a person in the taxable territory (India) representing such overseas supplier in the taxable territory for any purpose, such person (representative in India) shall get registered and pay integrated tax on behalf of the supplier.
In case the overseas 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.
Registration of Overseas OIDAR Service Provider:
The Overseas OIDAR services from a place outside India to a non-taxable online recipient can apply for registration in FORM GST REG-09A and obtain registration for providing OIDAR services from a place outside India ( For the purpose of non-taxable online recipient means any Government, local authority, government authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory)
Returns Filing by Overseas OIDAR Service Provider:
Every registered person providing online information and database access or retrieval services from a place outside India to a person in India other than a registered person shall file return in FORM GSTR-5A on or before the twentieth day of the month succeeding the calendar month or part thereof.
Examples of OIDAR Services:
1. Website hosting, webpage hosting, automated online distance maintenance of programmes and equipment.
2. Supply of software, accessing or downloading software and updating thereof.
3. Supply of images, accessing or downloading text and information, making available of databases.
4. Supply of music, films, games, accessing or downloading of music on to computers, mobile phones and of political, cultural, artistic, sporting, scientific and entertainment broadcasts and events.
5. Supply of distance teaching dependent on the Internet or similar electronic network is used as a tool simply for communication between the teacher and student. Work-books completed by pupils online and marked automatically, without human intervention.
Conclusion: In the current scenario of Globalization of market do not require much human intervention to facilitate trade and commerce. Even a person seating in house can carry out his business through the help of internet with any corner of the world. Now people are downloading music, study materials, watching streaming videos, playing online games and the product of internet business are available immediately for download or streaming. These e-products are classified as OIDAR Services. The taxability of OIDAR services was considered by the Government in the Service Tax regime and the same provision has been incorporated in GST. But there are certain further clarifications are needed for simplification of Tax provision of OIDAR Services. For normal registration under GST, PAN is the basis for identification but in case of Overseas OIDAR Service providers, the provision does not specify the basis of identification for registration. Further, It would be impractical to ask individual in India to register and undertake the necessary compliances under GST and pay tax only for a one off purchase on the internet. There is every chance of tax evasion by the OIDAR Service providers as no direct control mechanism of the Government or department officers to verify the each transaction and catch hold of the evader of tax. The Government should introduce proper mechanism to control evasion of tax in respect of OIDAR Services in GST regime.
Do you think CBDT should extend Tax Audit Report and relevant ITR Due Date? Please Comment, Vote, Retweet and Like.— Tax Guru (@taxguru_in) September 18, 2018