GST PROVISIONS ON OIDAR

GST PROVISIONS ON OIDAR (ONLINE INFORMATION DATA BASE ACCESS AND RETRIEVAL)

With the rapid technological developments, businesses are nowhere restricted by geographical borders. Internet is the most easy and affordable means for providing services abroad. Such services are facilitated through several mechanisms, which are put in conjunction with business activities, to deliver services outside India. One of the examples, is of Amazon, who provides cloud-based services (AWS) from the United States, in India.

MEANING OF OIDAR

Online Information Database Access and Retrieval is a type of services offered via the means of internet and could be used by the customer/user without any physical contact with the service provider.

Under the IGST act, OIDAR is described as the services whose distribution is managed by information technology over the internet or any electronic network and the essence of OIDAR is basically, automatic procurement, requiring minimal manual interference and difficult to provide service in the absence of information technology

OIDAR involves services such as:

  1. Any sought of advertisement published over internet.
  2. Cloud computing services providers like Google Drive, JIO drive etc.
  3. Supplying any e-books, movie, music, software and entertainment content via internet.
  4. Providing data or information, to any person, in electronic form through a computer network from a database created on the internet.
  5. Online gaming platforms or streaming.
  6. Any sought of digital content like movies and shows.
  7. Various sought of database storage services.

The services not covering the conditions of OIDAR Services, shall be considered as Non-OIDAR Services.

PROVISIONS UNDER DIFFERENT CASES

  1. BOTH THE SUPPLIER AND RECIPIENT IS IN INDIA

In such a case, the application of GST will be same for both OIDAR as well as for Non-OIDAR Digital Products & Services. GST would be levied @ 18% on the value of supply and once the tax is collected from the Service Recipient, the same be deposited with the Govt.

  1. SUPLIER IS OUTSIDE INDIA AND THE RECIPIENT IS IN INDIA
  • NON-OIDAR GOODS & SERVICES – In this case, GST would be levied, depending on the type of the recipient located in India.
  • Where the recipient is a business entity, GST will be levied on Reverse Charge Mechanism and the supplier is not required to register in India and pay GST in India.
  • In case, the recipient is not a business entity, GST would not be levied.
  • OIDAR GOODS AND SERVICE – In this case also, GST would be applicable as per the type of recipient.
  • Where the recipient is a business entity, GST will be paid under the Reverse Charge Mechanism. Thus, the Service Recipient shall be liable to pay GST to the Govt.
  • In case, the recipient is not a business entity, the service provider is required to take registration under GST in India, and pay taxes to the government. They can take up single GST Registration in India under the Simplified Registration Scheme in Form GST REG 10. Also, where the provider is supplying services using an intermediary, such an intermediary would be required to get register in India and pay taxes on behalf of the supplier.

DETERMINATION OF BUSINESS AND NON-BUSINESS ENTITY

In the context of application of GST, a person is said to be a business entity, if the same is registered under GST in India and submits their GSTIN to the supplier. However, where the GSTIN is not submitted with the supplier, the same be considered as a non-Business entity.

REASON FOR LEVY OF GST ON NON-RESIDENT OIDAR PROVIDERS

It is to be noted that earlier, where the supplier of any service is located outside India, no tax was levied, while the Service Supplier located in India have to pay taxes. Thus, this led to an unfair tax advantage for the service supplier not located in India.

To overcome this problem, the government started levying taxes on service suppliers located outside India. The Govt continues to levy GST on OIDAR Services supplied from outside India so as to provide fair means of tax collection towards service suppliers located in India.

LOCATION OF RECIPIENT

The location of the recipient shall be considered to be located in India, where any two conditions, out the following prescribed conditions, are satisfied –

  1. The location of address presented by the recipient through internet is in India.
  2. Any payment made for such service, involves credit card or debit card issued in India.
  3. The billing address provided by the recipient at the time of placing order for such service is in India.
  4. The IP address of the computer network used by the recipient for availing such service is in India.
  5. The bank from which the recipient made the payment is maintained is in India.
  6. Country code of the subscriber identity module card used by the recipient is of India.
  7. The location of the land line used by the recipient for getting the service is in India.

However, the government can notify any other service or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service. Such provisions are required to –

  • Prevent the recipient from the aspect of double taxation.
  • Prevent recipient from paying taxes, for a service, not taxable in India.
  • Have uniform application of rules, all over India.

EXAMPLE OF OIDAR SERVICE

TYPE OF SERVICES PROVIDED USING INFORMATION TECHNOLOGY NO SUPPLY WITHOUT INFORMATION TECHNOLOGY TERMED AS OIDAR SERVICE
DOCUMENT PHYSICALLY MAILED BY THE SENDER YES NO NO
DOCUMENT SEND AUTOMATICALLY BY THE SENDER’S COMPUTER NETWORK YES YES YES
DOCUMENT DOWNLOADED ONLINE FROM A WEBSITE YES YES YES
ONLINE COURSE INVOLVING TEACHING FROM PRE-RECORDED LECTURES. YES YES YES
ONLINE COURSE INVOVING TEACHING BY LIVE LECTURES OVER INTERNET. YES NO NO
ANY CONTENT OR DOCUMENT, PROVIDED OVER INTERNET. YES NO NO

OIDAR SERVICES

Some of the commonly seen OIDAR services are as follows –

  1. WEB PAGE DEVELOMENT, SITE HOSTING, DATABASE MANAGEMENT
    1. Website Hosting and Web-page designing.
    2. Automated, online and distance maintenance of programmes
    3. Administration over the remote systems.
    4. Data warehouse facility over internet.
    5. Online supply of on-demand disk space
  1. UPDATION OF SERVICE SUPPLIED
    1. Downloading of software’s and their updates.
    2. Software to block Banner Ads.
    3. Drivers downloaded for various facilities.
    4. Online automated installation of filters on websites.
    5. Online automated installation of firewalls.
  1. TRANSFER OF VARIOUS IMAGES, TEXT AND DATA, ALONG WITH UPLOADING ON THE DATABASE
    1. Accessing or downloading desktop themes
    2. Access to images and screensaver along with the option of downloading them.
    3. Digitised Content of Books and other electronic publications
    4. Subscription to online newspapers and journals
    5. Weblogs and website statistics
    6. Online news, traffic information and weather reports
    7. Provision of advertising space including banner ads on a website/ web page
    8. Use of Search Engines and Internet Directories
  1. ONLINE EVENTS AND DIGITAL PLATFORM FOR MOVIES, MUSIC AND SERIES.
    1. Access to music over computers and mobile phones.
    2. Downloading of various ringtones, or other sounds
    3. Accessing or downloading of films
    4. Downloading of Games on to Computers and Mobile Phones
    5. Online games available for downloading as well.
  1. DISTANCE LEARNING
    1. Automated Distance teaching over Internet or similar electronic network to function and the supply of which requires limited or no human intervention. Services includes the virtual classrooms lectures, which are not uploaded in advance.
    2. Online working and completion of task.

SUMMARY OF GST APPLICABILITY

TYPE OF RECIPIENT PROVIDER LOCATED IN INDIA PROVIDER LOCATED OUTSIDE INDIA
NON-OIDAR SERVICE
  • RECIPIENT IS BUSINESS ENTITY
 GST LEVIED UNDER FORWARD CHARGE MECHANISM AND THE SUPPLIER WILL PAY GST. GST LEVIED UNDER REVERSE CHARGE AND THE RECIPIENT WILL PAY GST.
  • RECIPIENT IS NON-BUSINESS ENTITY
 GST LEVIED UNDER FORWARD CHARGE MECHANISM AND THE SUPPLIER WILL PAY GST. GST WILL NOT LEVIED.
OIDAR SERVICE
  • RECIPIENT IS BUSINESS ENTITY
 GST LEVIED UNDER FORWARD CHARGE MECHANISM AND THE SUPPLIER WILL PAY GST. GST LEVIED UNDER REVERSE CHARGE AND THE RECIPIENT WILL PAY GST.
  • RECIPIENT IS NON-BUSINESS ENTITY
 GST LEVIED UNDER FORWARD CHARGE MECHANISM AND THE SUPPLIER WILL PAY GST. GST LEVIED UNDER FORWARD CHARGE MECHANISM AND THE SUPPLIER WILL PAY GST.

 

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