OIDAR Services in GST: EximGuru.com
Online Information Data Base Access and Retrieval (OIDAR)Services in GST
What is OIDAR?
Online Information Database Access and Retrieval services (OIDAR) is a category of services providedthrough the medium of internet and received by therecipient online without having any physical interfacewith the supplier of such services. E.g. download of ane-book online for a payment would amount to receipt ofOIDAR services by the consumer.
The IGST Act defines OIDAR as services whose delivery ismediated by information technology over the internet oran electronic network and the nature of which renderstheir supply essentially automated involving minimalhuman intervention. These include electronic servicessuch as:
(i) Advertising on the internet
(ii) Providing cloud services
(iii) Provision of e-books, movie, music, software and other intangibles through telecommunicationnetworks or internet
(iv) Providing data or information, retrievable orotherwise, to any person in electronic form througha computer network
(v) Online supplies of digital content (movies, televisionshows, music and the like)
(vi) Digital data storage
(vii) Online gaming
Why OIDAR is requires a treatment different fromother services?
The nature of OIDAR services are such that it canbe provided online from a remote location outsidethe taxable territory. A similar service provided byan Indian Service Provider, from within the taxableterritory, to recipients in India would be taxable.Further, such services received by a registered entityin India would also be taxable under reverse charge.The overseas suppliers of such services would havean unfair tax advantage should the services providedby them be left out of the tax net. At the same time,since the service provider is located overseas and maynot be having a presence in India, the complianceverification mechanism become difficult.It is under suchcircumstances, that the government has plans to comeout with a simplified scheme of registration for suchservice providers located outside India.
How would OIDAR services be taxable under GST?
For any supply to be taxable under GST, the place of supplyin respect of the subject supply should be in India. In case,both the supplier of OIDAR Service and the recipient ofsuch service is in India, the place of supply would be thelocation of the recipient of service i.e. it would be governedby the default place of supply rules.
What happens in cases where the supplier of service islocated outside India and the recipient is located in India?In such cases also, the place of supply would be India andthe transaction would be amenable to tax.
Who will be responsible for paying the tax?
In cases where the supplier of such service is located outsideIndia and the recipient is a business entity (registeredperson) located in India, the reverse charge mechanismwould get triggered and the recipient in India (registeredentity under GST) will be liable to pay GST under reversecharge and undertake necessary compliances.
Now what happens if the supplier is located outside Indiaand the recipient in India is an individual consumer? Insuch cases also, the place of supply would be India and thetransaction is amenable to levy of GST. But the problem is,how would such tax be collected? It would be impracticalto ask the individual in India to register and undertake thenecessary compliances under GST for a one off purchaseon the internet.
For such cases the IGST Act provides that on supplyof online information and database access or retrievalservices by any person located in a non-taxable territoryand received by a non-taxable online recipient, the supplierof services located in a non-taxable territory shall be theperson liable for paying integrated tax on such supply ofservices.
Now if an intermediary located outside India arranges orfacilitates supply of such service to a non-taxable onlinerecipient in India, the intermediary would be treated as thesupplier of the said service, except when the intermediarysatisfies the following conditions:
(a) The invoice or customer’s bill or receipt issued bysuch intermediary taking part in the supply clearlyidentifies the service in question and its supplier innon-taxable territory
(b) The intermediary involved in the supply does notauthorise the charge to the customer or take part in itscharge. This means that the intermediary neither collectsor processes payment in any manner nor is responsiblefor the payment between the non-taxable onlinerecipient and the supplier of such services
(c) The intermediary involved in the supply does notauthorise delivery
(d) The general terms and conditions of the supply are notset by the intermediary involved in the supply but by thesupplier of services
How would the entity located outside India comply with theresponsibilities entrusted under GST?
The supplier (or intermediary) of online information anddatabase access or retrieval services shall, for payment ofintegrated tax, take a single registration under the SimplifiedRegistration Scheme in Form GST REG-10. The supplier shalltake registration at Principal Commissioner of Central Tax,Bengaluru West who has been the designated for grantregistration in such cases.
In case there is a person in the taxable territory (India)representing such overseas supplier in the taxable territoryfor any purpose, such person (representative in India) shallget registered and pay integrated tax on behalf of thesupplier.
In case the overseas supplier does not have a physicalpresence or does nothave a representative for any purpose inthe taxable territory, he may appoint a person inthe taxableterritory for the purpose of paying integrated tax and suchperson shall be liablefor 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 anyother person not registered and receiving online informationand database access or retrieval services in relation to anypurpose other than commerce, industry or any other businessor profession, located in taxable territory.
The expression “governmental authority” means an authorityor 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 orcontrol, to carry out any function entrusted to a municipalityunder article 243W of the Constitution.
Examples of what could be or could not be OIDAR services
The inclusive part of the definition of OIDAR servicesare only indicative and not exhaustive.To determine if a particularservice 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 downloadable PDFs | YES | YES | YES |
| Online course consisting of pre-recorded videos and downloadable 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 ofprogrammes and equipment
(a) Website hosting and webpage hosting
(b) Automated, online and distance maintenance ofprogrammes
(c) Remote systems administration
(d) Online data warehousing where specific data isstored and retrieved electronically
(e) Online supply of on-demand disc space
2. Supply of software and updating thereof
(a) Accessing or downloading software (includingprocurement/accountancy programmes andanti-virus software) plus updates
(b) Software to block banner adverts, otherwise knownas Banner blockers
(c) Download drivers, such as software thatinterfaces 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 makingavailable of databases
(a) Accessing or downloading desktop themes
(b) Accessing or downloading photographic or pictorialimages or screensavers
(c) The digitised content of books and other electronicpublications
(d) Subscription to online newspapers and journals
(e) Weblogs and website statistics
(f) Online news, traffic information and weatherreports
(g) Online information generated automatically bysoftware from specific data input by the customer,such as legal and financial data, (in particular, datasuch as continually updated stock market data, inreal time)
(h) The provision of advertising space including bannerads on a website/web page(i) Use of search engines and Internet directories
4. Supply of music, films and games, including gamesof chance and gambling games, and of political,cultural, artistic, sporting, scientific and entertainmentbroadcasts and events
(a) Accessing or downloading of music on to computersand 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 andmobile phones
(e) Accessing automated online games whichare dependent on the Internet, or othersimilar electronic networks, where players aregeographically remote from one another
5. Supply of distance teaching
(a) Automated distance teaching dependent on theInternet or similar electronic network to functionand the supply of which requires limited or no humanintervention. These include virtual classrooms, exceptwhere the Internet or similar electronic network isused as a tool simply for communication between theteacher and student
(b) Workbooks completed by pupils online and markedautomatically, without human interventionThe place of supply of online information and database accessor retrieval services shall be the location of the recipient ofservices.