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Payment to ChatGPT for Add-on Features is covered Under GST

GSNT New GST Rates update effective from July 2022

Payment to ChatGPT for Add-on Features is covered Under GST

GST implications on payments made to OpenAI (ChatGPT) for add-on features is well-structured and aligns with Indian GST laws regarding Online Information and Database Access or Retrieval (OIDAR) Services.

GST Compliance Summary: ChatGPT for Add-on features is covered under GST:

Classification of ChatGPT Services under GST

  • OIDAR Service: As per Section 2(17) of the IGST Act, 2017, ChatGPT’s digital AI-based services qualify as OIDAR. ChatGPT provides AI-based services digitally over the internet, without significant human intervention. As per Section 2(17) of the IGST Act, 2017, OIDAR services include:
    • Cloud-based software services
    • Online data storage
    • Artificial intelligence-based services provided digitally
  • Since ChatGPT operates digitally and delivers services via the internet, it qualifies as an OIDAR service provider
  • SAC Code: Likely under SAC 9984 (Telecommunication, Broadcasting & IT Services) or SAC 9983 (Other IT & Digital Advertising Services).
  • GST Rate: 18% IGST.

GST Compliance Scenarios 

(A) If OpenAI (ChatGPT) is a Foreign Entity (Non-Resident Service Provider)

  • Nature of Transaction: Import of Services under GST.
  • GST Treatment: Reverse Charge Mechanism (RCM) applicable.
  • GST Payment & Filing:
    • Pay 18% IGST under RCM (as per Section 5(3) of IGST Act & Notification No. 10/2017-IT (Rate)).
    • Report in GSTR-3B (Table 3.1(d)).
    • Report in GSTR-1 (Table 4 – Inward Supplies Liable to RCM).
    • ITC Availability: Eligible if used for business purposes (Claim ITC in GSTR-3B (Table 4(A)(3))).

(B) If OpenAI (ChatGPT) is Registered under GST in India

  • Nature of Transaction: Domestic taxable supply.
  • GST Compliance:
    • OpenAI will charge 18% GST on the invoice.
    • Indian company can claim ITC on GST paid, if used for business.
    • GST Compliance Steps:
      • Verify GST invoice with GSTIN.
      • Pay the invoice amount including 18% GST.
      • Claim ITC in GSTR-3B (Table 4(A)(5)).
  • Documentation & Record-Keeping: GST taxpayers are required to maintain invoice & payment records. Also Issue self-invoice under Rule 46 of CGST Rules in case of RCM payment. And they ensure correct classification under SAC codes and proper GST filing.

Conclusion

  • If OpenAI (ChatGPT) does not have a GST registration in India, then RCM is applicable (18% IGST).
  • In case OpenAI has a GST registration in India, it will charge 18% GST directly, and ITC can be claimed.
  • Proper GSTR-3B and GSTR-1 compliance is required for correct reporting and ITC claims.

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