Government has issued series of service tax notifications which have radically changed service tax implications on online information and database access or retrieval services (â€œOIDAR serviceâ€).
Notification No. 46/2016-ST, ïƒ¼ Notification No. 47/2016-ST, ïƒ¼ Notification No. 48/2016-ST, ïƒ¼ Notification No. 49/2016-ST and ïƒ¼ Circular No. 202/12/2016-ST dated 9th Nov 2016 (Applicable from 1st Dec 2016)
I have attempted to provide an In depth analysis of these notifications & Circulars to assist you in Impact analysis of the same.
At the outset, I have following observations after going through the updated legal provisions :
Earlier, Place of Provision was â€œLocation of Service Providerâ€ â€“ means if X (Hong Kong) provides its these services to Indian customer â€“ these services was not taxable in India as Location of Service Provider was Non Taxable Territory i.e Hongkong & Service Tax law applies on taxable territory. But now w.e.f 1st December 2016 â€œ Place of provisionâ€ of such service has been amended and provided as â€œLocation of Service Receiverâ€ means now it would be taxable in India.
Since it would be taxable in India â€“ This service has been provided under reverse charge i.e service receiver has to pay full service tax on the same, so where is the role of Y (Indian representative of X), if X Hongkong provides these services to an Indian customer.
If the Indian customer is a company or any other person other than Non Assessee Online Recipient e Government, Local Authority, Government authority or an Individual not registered with service tax department â€“ then that company or other person has to pay service tax on the same.
But if that Indian customer is Non Assessee Online Recipient i.e Government, Local Authority, Government authority or an Individual not registered with service tax department then X (HK) is liable to pay service tax in India through its representative in India i.e Y (India).
This was one illustration, further if X India provide any â€œOnline information and database access or retrieval services (â€œOIDAR serviceâ€) w.e.f 1st December 2016 outside India, it would be tax free as now POPOS is â€œLocation of Service Receiverâ€. #pdf