Online Information Data Base
Access and Retrieval OIDAR Services in GST
Impact of GST impact is everywhere, even education
domain will also bear the pain.
Please find attached detailed article on “Online Information Data Base Access and
Retrieval OIDAR Services in GST”
Article Synopsis
·
What is OIDAR?
·
Why OIDAR is requires a treatment
different from other services?
·
How would OIDAR services be
taxable under GST?
·
Who will be responsible for
paying the tax?
·
How would the entity located
outside India comply with the responsibilities entrusted under GST?
·
Who is a Non-Taxable Online
Recipient?
·
Examples of what could be or
could not be OIDAR services
·
Indicative List of OIDAR Services
What is OIDAR?
Online Information Database Access and
Retrieval services (OIDAR) 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. E.g. download of an
e-book online for a payment would amount to receipt of OIDAR services by the
consumer.
The IGST Act defines OIDAR as 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 involving minimal human intervention. These include 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
(vii) Online gaming
Why OIDAR is requires a treatment different
from other services?
The nature of OIDAR services are such that it
can be provided online from a remote location outside the taxable territory. A
similar service provided by an Indian Service Provider, from within the taxable
territory, to recipients in India would be taxable. Further, such services
received by a registered entity in India would also be taxable under reverse
charge. The overseas suppliers of such services would have an unfair tax
advantage should the services provided by them be left out of the tax net. At
the same time, since the service provider is located overseas and may not be
having a presence in India, the compliance verification mechanism become
difficult.It is under such circumstances, that the government has plans to come
out with a simplified scheme of registration for such service providers located
outside India.
How would OIDAR services be taxable under
GST?
For any supply to be taxable under GST, the
place of supply in respect of the subject supply should be in India. In case,
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
i.e. it would be governed by the default place of supply rules.
What happens in cases where the supplier of
service is located outside India and the recipient is located in India? In such
cases also, the place of supply would be India and the transaction would be
amenable to tax.
Who will be responsible for paying the tax?
In cases where the supplier of such service
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.
Now what happens 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. But the problem is, how would such tax be collected? It would
be impractical to ask the individual in India to register and undertake the
necessary compliances under GST for a one off purchase on the internet.
For such cases the IGST Act provides that 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.
Now if an intermediary located outside India
arranges or facilitates 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 involved in
the supply does not authorize the charge to the customer or take part in its
charge. This means that 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 authorize 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
How
would the entity located outside India comply with the responsibilities
entrusted under GST?
The supplier (or intermediary) of
online information and database access or retrieval services shall, for payment
of integrated tax, take a single registration under the Simplified Registration
Scheme in Form GST REG-10. The supplier shall take registration at Principal
Commissioner of Central Tax, Bengaluru 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.
Who is
a Non-Taxable Online Recipient?
“Non-Taxable Online Recipient”
means any Government, local authority, governmental 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.
The expression “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 any
Government
with ninety per cent or more
participation by way of equity or control, to carry out any function entrusted
to a municipality under article 243W of the Constitution.
Examples
of what could be or could not be OIDAR services
The inclusive part of the
definition of OIDAR services are only indicative and not exhaustive.To
determine if a particular service is an OIDAR service, the following test can
be applied:
|
Service
|
Whether Provision
of Service mediated by Information technology over the internet or an
electronic network
|
Whether it is
Automated and impossible to ensure in the absence of information technology
|
OIDAR
Service
|
|
PDF document
manually emailed by provider
|
YES
|
NO
|
NO
|
|
PDF document
Automatically emailed by provider’ s system
|
YES
|
YES
|
YES
|
|
PDF document
automatically Downloaded from site
|
YES
|
YES
|
YES
|
|
Stock photographs
Available for automatic download
|
YES
|
YES
|
YES
|
|
Online course
consisting of pre- recorded videos and Down loadable PDFs
|
YES
|
YES
|
YES
|
|
Online course
consisting of pre- recorded videos and Down loadable PDFs plus support from a
live tutor
|
YES
|
NO
|
NO
|
|
Individually
commissioned content sent in digital form e.g., photographs, reports, medical
results
|
YES
|
NO
|
NO
|
Indicative
List of OIDAR Services
1.
Website supply, web-hosting, distance maintenance of programmes and equipment
(a) Website hosting and web page
hosting
(b) Automated, online and
distance maintenance of programmes
(c) Remote systems administration
(d) Online data warehousing where
specific data is stored and retrieved electronically
(e) Online supply of on-demand
disc space
2.
Supply of software and updating thereof
(a) Accessing or downloading
software (including procurement/accountancy programmes and anti-virus software)
plus updates
(b) Software to block banner
adverts, otherwise known as Banner blockers
(c) Download drivers, such as
software that interfaces computers with peripheral equipment (such as printers)
(d) Online automated installation
of filters on websites
(e) Online automated installation
of firewalls
3.
Supply of images, text and information and making available of databases
(a) Accessing or downloading
desktop themes
(b) Accessing or downloading
photographic or pictorial images or screensavers
(c) The digitised content of
books and other electronic publications
(d) Subscription to online
newspapers and journals
(e) Weblogs and website
statistics
(f) Online news, traffic
information and weather reports
(g) Online information generated
automatically by software from specific data input by the customer, such as
legal and financial data, (in particular, data such as continually updated
stock market data, in real time)
(h) The provision of advertising
space including banner ads on a website/web page
(i) Use of search engines and
Internet directories
4.
Supply of music, films and games, including games of chance and gambling games,
and of political, cultural, artistic, sporting, scientific and entertainment
broadcasts and events
(a) Accessing or downloading of
music on to computers and mobile phones
(b) Accessing or downloading of
jingles, excerpts, ringtones, or other sounds
(c) Accessing or downloading of
films
(d) Downloading of games on to
computers and mobile phones
(e) Accessing automated online
games which are dependent on the Internet, or other similar electronic
networks, where players are geographically remote from one another
5.
Supply of distance teaching
(a) Automated distance teaching
dependent on the Internet or similar electronic network to function and the
supply of which requires limited or no human intervention. These include
virtual classrooms, except where the Internet or similar electronic network is
used as a tool simply for communication between the teacher and student
(b) Workbooks completed by pupils
online and marked automatically, without human intervention
The place of supply of online
information and database access or retrieval services shall be the location of
the recipient of services.
Courtesy | Taxguru.in
Regards
Pralhad
Jadhav
Senior Manager @
Knowledge Repository
Khaitan
& Co
Upcoming Lecture | ACTREC - BOSLA Annual lecture series (125th birth anniversary of father of library
science, Padmashree Dr. S. R. Ranganathan) on Saturday, 12th August 2017 at Advanced Centre for Treatment,
Research and Education in Cancer (ACTREC), Kharghar, Navi Mumbai. (Theme | 'MakerSpace')
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