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GST on Online Information Data Base Access and Retrieval Service (OIDAR)

Amit Harkhani 
on 21 April 2020

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INTRODUCTION:

Online Information Database Access and Retrieval services (hereinafter referred to as 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. downloading of an e-book online for a payment would amount to receipt of OIDAR services by the consumer downloading the e-book and making payment.

DEFINITION:

Online Information Data Base Access and Retrieval Service (OIDAR):- As per the Section 2(17) of IGST Actr, 2017 "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,

a) Advertising on the internet.
b) Providing cloud services.
c) Provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet.
d) Providing data or information, retrievable or otherwise, to any person in electronic form through a computer network.
e) Online supplies of digital content (movies, television shows, music and the like).
f) Digital data storage.
g) Online gaming.

Non-taxable online recipient:-  As per the Section 2(16) of IGST Actr, 2017 "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.

Explanation:- For the purposes of this clause, 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.

Information Technology:- IT or information technology refers to the development, maintenance, and use of computer software, systems, and networks. (Such as computer hardware, software, and networking)

From the above mentioned definition of OIDAR it is concluded that services are to be considered as OIDAR if the all the following conditions satisfied,

1) Services are to be deliver through internet.
2) The supply is essentially automated involving minimal human intervention.
3) Supply is impossible without information technology.

INDICATIVE LIST OF OIDAR SERVICES:

1) Website supply, web-hosting, distance maintenance of programmes and equipment:- 

(a) Website hosting and webpage 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 antivirus software) plus updates.
(b) Software to block banner adverts showing, 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 such data 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, including 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.

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 in such circumstances, that the government has plans to come out with a simplified scheme of registration for such service providers located outside.

REGISTRATION:

If OIDAR Service Provider located in India:-OIDAR service providers with a place of business in India can obtain GST Registration through the normal method by applying as through the GST common portal in Form GST REG-01.

If OIDAR Service Provider located in out of India:-

1) 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.

2) 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.

3) 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.

PLACE OF SUPPLY:

1) Location of supplier and recipient is in India (Section 12(2) of IGST Act, 2017):- Place of supply is a location of recipient.

2) Location of supplier is outside India (Section 13 of IGST Act, 2017):- Place of supply is in India.

WHO WILL BE RESPONSIBLE FOR PAYING THE TAX?

1) Provider of OIDAR Service Located in India irrespective of location of service Recipient:-Person providing OIDAR services is liable to pay GST. (However if recipient of service is located outside of india then  it is considered as Zero rated sales i.e. Export hence no GST is payable by the service provider)

2) Provider of OIDAR Service is Located outside of India and recipient is registerd under GST in India:- IGST is payable by Service recipient under Reverse Charge mechanism (RCM), It is considered as Import.

3) Provider of OIDAR Service is Located outside of India and service is received by non-taxable online recipient:- supplier of services located in a non-taxable territory shall be the person liable for paying integrated tax on such supply of services.

4) Where the OIDAR service provider supplies services through an intermediary:- 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 or made available 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 authorise the charge to the customer or take part in its charge which is that the intermediary neither collects or processes payment in any manner nor is responsible for the payment between the nontaxable 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 supplier  of services.

RETURNS:

1) OIDAR Service Providers Located in India:- OIDAR service providers located in India would have to file GSTR-1, GSTR-2, GSTR-3 and annual GST return like a regular taxpayer.

2) OIDAR Service Providers Located Outside India:- In terms of Rule 64 of CGST Rules, 2017, every registered person providing online information and data base access or retrieval services from a place outside India to a person in India other than a registered person shall file return in FORM GSTR-5A on or before the twentieth day of the month succeeding the calendar month or part thereof.

SAC CODE & GST RATE:

SAC Code:- 99843
GST Rate:- 18% (However Supply consisting only of e-book:- GST rate is 5%)

EXAMPLES:-

A) What could be or could not be OIDAR Services:

1) Pdf document manually emailed by provider,

a) Use of IT:-Yes
b) Through Internet:-Yes
c) Essentially automated involving minimal human intervention:-No
d) OIDAR Service:-No

2) Pdf document automatically emailed by provider’ s system,

a) Use of IT:-Yes
b) Through Interent:-Yes
c) Essentially automated involving minimal human intervention:-Yes
d) OIDAR Service:-Yes

3) Pdf document automatically downloaded from site,

a) Use of IT:-Yes
b) Through Interent:-Yes
c) Essentially automated involving minimal human intervention:-Yes
d) OIDAR Service:-Yes

4) Stock photographs available for automatic download,

a) Use of IT:-Yes
b) Through Interent:-Yes
c) Essentially automated involving minimal human intervention:-Yes
d) OIDAR Service:-Yes

5) Online course consisting of pre-recorded videos and downloadable pdfs,

a) Use of IT:-Yes
b) Through Interent:-Yes
c) Essentially automated involving minimal human intervention:-Yes
d) OIDAR Service:-Yes

6) Online course consisting of pre-recorded videos and downloadable pdfs plus support from a live tutor,

a) Use of IT:-Yes
b) Through Interent:-Yes
c) Essentially automated involving minimal human intervention:-No
d) OIDAR Service:-No

7) Individually commissioned content sent in digital form e.g., photographs, reports, medical results,

a) Use of IT:-Yes
b) Through Interent:-Yes
c) Essentially automated involving minimal human intervention:-No
d) OIDAR Service:-No

B) Applicability of GST for OIDAR Services:-

1) Hotstar (registered in India) allows Indian users to register and watch movies,

a) Location of Supplier of service:-India
b) Location of recipient of service:-India
c) Taxability:-Yes
d) Forward Charge/ Reverse Charge:-Forward Charge

2) An Indian Co.(registered)  asks BlueHost (US) for web hosting services,

a) Location of Supplier of service:-Outside of India
b) Location of recipient of service:-India
c) Taxability:-Yes
d) Forward Charge/ Reverse Charge:-Reverse Charge (GST is Payable by Indian Co.)

3) A student in India registers in Netflix (US) for watching movies,

a) Location of Supplier of service:-Outside of India
b) Location of recipient of service:-India
c) Taxability:-Yes
d) Forward Charge/ Reverse Charge:-Forward Charge (IGST is payable by Netflix)

4) Hotstar allows foreigners to register and watch movies,

a) Location of Supplier of service:-India
b) Location of recipient of service:-Outside of India
c) Taxability:-No
d) Forward Charge/ Reverse Charge:-GST is not applicable as it is an export of service.

5) Netflix (US) provides online movie streaming services to people in US,

a) Location of Supplier of service:-Outside of india
b) Location of recipient of service:-Outside of India
c) Taxability: No
d) Forward Charge/ Reverse Charge:-This is not covered in Indian GST


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