Seeks to amend Service Tax Rules, 1994 so as to prescribe that the person located in non-taxable territory providing online information and database access or retrieval services to ‘non-assesse online recipient’, as defined therein, is liable to pay service tax and the procedure for payment of service tax.
a) Amendment in Place of Provision of Service Rules, 2012
Central Government vide Notification No. 46/2016-ST., Dated: November 09 2016 has amended Place of Provision of Service Rules to provide that in case of online information and database access or retrieval services the place of provision of service would be location of the service receiver. Accordingly, proviso to Rule 3 has been amended and Point ‘b’ of Rule 9 has been deleted to this effect.
b) Amendment in Mega Exemption Notification
Entry 34 of Mega Exemption Notification provides exemption to services provided by a person in non-taxable territory to Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory
Central Government vide Notification No. 47/2016-ST., Dated: November 09 2016 has amended entry 34 of the Mega Exemption Notification No. 25/2012 -ST, dated 20.06.2012 to provide that the exemption shall not apply to online information and database access or retrieval services received by persons specified above.
c) Amendment in Service Tax Rules, 1994
Central Government vide Notification No. 48/2016-Service Tax dt. 09-11-2016 has amended Service Tax Rules, 1994 to prescribe that the person located in non-taxable territory providing OIDAR services to ‘non-assesse online recipient’, as defined therein, is liable to pay service tax.
Further, following definitions have been provided:
i) “non-assesse online recipient” means Government, a local authority, a governmental authority or an individual receiving OIDAR services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory
ii) “online information and database access or retrieval (OIDAR) 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:
- advertising on the internet;
- providing cloud services;
- provision of e-books, movie, music, software and other intangibles via telecommunication networks or 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, etc.);
- digital data storage; and
- online gaming;
iii) Proviso(s) added in the definition of Person Liable for Paying Service Tax
- When an intermediary located in the non-taxable territory including an electronic platform, arranges or facilitates provision of cross border B2C OIDAR service but does not provide the main service on his account, the intermediary shall be deemed to be receiving such services from the service provider in non-taxable territory and providing such services to the non-assesse online recipient except when such intermediary satisfies all the specified conditions.
- When the service provider in non-taxable territory is represented for any purpose in taxable territory by a person, then such person is deemed to be the person liable for paying Service tax.
- If the service provider in non-taxable territory does not have a physical presence or does not have a representative for any purpose in the taxable territory, the service provider may appoint a person in the taxable territory for the purpose of paying Service tax and such person shall be liable for paying Service tax.
- A person receiving OIDAR services shall be deemed to be a non-assesse online recipient, if such person does not have Service tax registration under the Service Tax Rules
iv) New proviso inserted in Rule 4(1) of the Service Tax Rules prescribing registration requirement/procedure of person located in non-taxable territory liable for paying Service tax in the case of OIDAR services.
v) New proviso inserted in Rule 4A(1) of the Service Tax Rules prescribing invoicing details in case of OIDAR services provided or agreed to be provided in taxable territory by a person located in the non-taxable territory.
vi) Amendment in Rule 7(1): Return form ST-3C has been inserted.
vii) An application for registration in form ST-1A is to be made by a person located in nontaxable territory providing OIDAR services within a period of thirty days from the date on which the service tax is levied or the person located in non-taxable territory has commenced supply of taxable services in the taxable territory in India and the registration shall be deemed to be granted in form ST-2A from the date of receipt of the application.
d) Amendment in Reverse Charge Notification
Central Government vide Notification No. 49/2016-Service Tax dt. 09-11-2016 has amended Reverse Charge Notification No. 30/2012- ST, dated the 20th June, 2016 to put compliance liability of service tax payment and procedure on to the service provider located in the nontaxable territory with respect to online information and database access or retrieval services provided in the taxable territory to ‘non-assesse online recipient’.
e) In all the Notifications issued, the definition of OIDAR services as provided in Service Tax Rules, 1994 would apply mutatis mutandis.
f) Clarifications on Issues pertaining OIDAR services
Central Government vide Circular No. 202/12/2016-ST, dt. 09-11-2016 has provided a list of 46 issues and clarifications thereto in respect of various aspects pertaining to the taxation of OIDAR services. Detailed circular may be viewed at http://www.idtc.icai.org!latest-circular.html
With effect of these Notifications! Circular cross border B2C OIDAR services provided by a foreign service provider to a person in India will become taxable from December 1, 2016 onwards, which includes webpage hosting, online maintenance of programmes, remote systems administration, data warehousing, cloud storage and downloading of games, music, distance teaching, and supply of images, text and information and making available of databases, etc.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
CENTRAL BOARD OF EXCISE AND CUSTOMS
NEW DELHI
NOTIFICATION NO. 48/2016-ST, Dated: November 9, 2016
G.S.R. 1057(E) In exercise of the powers conferred by sub-section (1), read with sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994,namely:-
1. (1) These rules may be called the Service Tax (Fourth Amendment) Rules, 2016.
(2) They shall come into force on the 1st day of December, 2016.
2. In the Service Tax Rules, 1994,-
(i) in rule 2, in sub-rule (1),-
(a) after clause (ccb), the following clause shall be inserted, namely:-
‘(ccba) “non-assesse online recipient” means Government, a local authority, a governmental authority or an individual 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;
Explanation.- For the purposes of this clause, “governmental authority” means an authority or a board or any other body :
(i) set up by an Act of Parliament or a State legislature; or
(ii) established by Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243Wof the Constituion;’;
(b) after clause (ccc), the following clause shall be inserted, namely:-
‘(ccd) “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 via 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, etc.);
(vi) digital data storage; and
(vii) online gaming;’;
(c) in clause (d),-
(i) in sub-clause (i),-
(a) in item (G), after the words “taxable service”, the words “other than online information and database access or retrieval services,” shall be inserted;
(b) after item (G), following item shall be inserted, namely:-
“(H) in relation to services provided or agreed to be provided by way of online information and database access or retrieval services, by any person located in a non-taxable territory and received by any person in the taxable territory other than non-assesse online recipient, recipient of such service;”;
(ii) in sub-clause (ii), the following provisos shall be inserted, namely:-
“Provided that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by non-assesse online recipient, provider of service located in a non-taxable territory shall be the person liable for paying service tax:
Provided further that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by non-assesse online recipient, an intermediary located in the non-taxable territory including an electronic platform, a broker, an agent or any other person, by whatever name called, who arranges or facilitates provision of such service but does not provides the main service on his account shall be deemed to be receiving such services from the service provider in non-taxable territory and providing such services to the non-assesse online recipient except when such intermediary satisfies all 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, its supplier in non-taxable territory and the service tax registration number of the supplier in taxable territory;
(b) the intermediary involved in the supply does not authorise the charge to the customer or take part in its charge i.e. intermediary neither collects or processes payment in any manner nor is responsible for the payment between the non-assesse online recipient and the supplier of such services;
(c) the intermediary involved in the supply does not authorise delivery;
(d) the general terms and conditions of the supply are not set by the intermediary involved in the supply but by the service provider:
Provided also that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by non-assesse online recipient, any person located in taxable territory representing such service provider for any purpose in the taxable territory shall be the person liable for paying service tax:
Provided also that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by non-assesse online recipient, if the service provider does not have a physical presence or does not have a representative for any purpose in the taxable territory, the service provider may appoint a person in the taxable territory for the purpose of paying service tax and such person shall be liable for paying service tax:
Provided also that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by any person located in the taxable territory, 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 service recipient via internet is in 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 service recipient settles payment has been issued in the taxable territory;
(c) the service recipient’s billing address is in the taxable territory;
(d) the internet protocol address of the device used by the service recipient is in the taxable territory;
(e) the service recipient’s bank in which the account used for payment is maintained is in the taxable territory;
(f) the country code of the subscriber identity module (SIM) card used by the service recipient is of taxable territory;
(g) the location of the service recipient’s fixed land line through which the service is received by the person, is in taxable territory:
Provided also that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by non-assesse online recipient, a person receiving such services shall be deemed to be a non-assesse online recipient, if such person does not have service tax registration under these rules.”;
(ii) in rule 4, in sub rule (1), after third proviso, the following proviso shall be inserted, namely:-
“Provided also that a person located in non taxable territory liable for paying the service tax in the case of online information and database access or retrieval services may make an application for registration in form ST-1A for registration within a period of thirty days from the date on which the service tax under section 66B of the Act is levied or the person located in non taxable territory has commenced supply of taxable services in the taxable territory in India and notwithstanding anything contrary in these rules, the registration shall be deemed to be granted in form ST-2A from the date of receipt of the application.”;
(iii) in rule 4A, in sub-rule 1, after the sixth proviso, the following proviso shall be inserted, namely:-
“Provided also that in case of online information and database access or retrieval services provided or agreed to be provided in taxable territory by a person located in the non-taxable territory, an invoice, a bill or, as the case may be, challan shall include any document, by whatever name called, whether or not serially numbered, but containing name and address of the person receiving taxable service to the extent available and other information in such documents as required under this sub-rule.”;
(iv) in rule 7, in sub-rule (1) after the letters and figure “ST-3A”, the word, letters and figure “or ST-3C” shall be inserted;
(v) after Form ST-1, the following Form shall be inserted, namely :-
“FORM ST- 1A
[Application form for registration under section 69 of the Finance Act, 1994 (32 of 1994) for person in non-taxable territory providing online information and database access or retrieval services in India]
“FORM ST- 2A
Certificate of registration under section 69 of the Finance Act, 1994 (32 of 1994)
“FORM-ST-3C
Return under section 70 of the Finance Act, 1994, read with rule 7 of Service Tax Rules, 1994 with respect to online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by any person located in the taxable territory
Download Full Text of the Notifications along with Forms
[F. No.354/149/2016-TRU]
(Anurag Sehgal)
Under Secretary to the Govt. of India
Note:- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide notification No. 2/94-SERVICE TAX, dated the 28th June, 1994 vide number G.S.R. 546 (E), dated the 28th June, 1994 and last amended vide notification No. 43/2016-Service Tax, dated the 28th September, 2016 vide number G.S.R. 923 (E), dated the 28th September, 2016.
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