Online Information and Database Access or Retrieval services or say OIDAR services : An equal hit for person located in Non – Taxable Territory (i.e. out of India)

Definition of OIDAR services:

Meaning of OIDAR services:

As per Section 2(17) of IGST Act, OIDAR services are those 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,–

1. advertising on the internet;
   

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2. providing cloud services;
   

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3. provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet;
   

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4. providing data or information, retrievable or otherwise, to any person in electronic form through a computer network;
   

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5. online supplies of digital content (movies, television shows, music and the like);
   

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6. digital data storage; and
   

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7. online gaming;
   

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Along with definition, it provides an inclusive list of seven types of services which are considered as OIDAR services. Please note this list is not an exhaustive list. It means there might be so many other services which can be considered as OIDAR services on the basis of definition of OIDAR. So, any person receiving such services must consider its definition before finalizing its decision.

OIDAR services: where Location of service provider and service receiver both is in India

Firstly we will analyze the GST position where service provider and service receiver both are located in India with reference to Section 7 and 12 of IGST Act.  In this case, place of supply of service is the location of service receiver.

Where service provider is a registered person in GST, he will raise the invoice with appropriate tax as per the location of service receiver.

In case, service provider is not a registered person, and service receiver is a registered person, then receiver will pay GST under reverse charge.

And in case, both service provider and service receiver are Un-registered persons, then, there is will be no GST on this transaction.

Now we will analyze the position where Location of service provider is Outside India and Location of service receiver is in India with reference to Section 7 and Section 13 of IGST Act

In this case too, place of supply of services is Recipient of services.

Thus, in case, where service receiver in India is a registered person in GST in India, then, he will pay GST as Import of services.

However, as per Section 14 of IGST Act, in case where service receiver is a Non-taxable online recipient, then, supplier sitting out of India (or say, located in non-taxable territory of India) shall be liable to pay IGST on such supply of services. Government has provided an additional provision for this levy.

As per Section 2(16) of IGST Act, 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 (OIDAR) services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.

GST in case Intermediaries are facilitating or arranging for supply of OIDAR services (Section 14 of IGST Act) :

Definition of Intermediary: 

As per Section 2(13) of IGST, “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.

To tap the intermediaries sitting in Non-taxable territory providing OIDAR services, government has further provided that where such intermediaries are not directly involved in provisioning of services but they are representing themselves as provider/facilitator or arranges for supplying of OIDAR services to non- taxable online recipient, then such intermediary will be considered as Service Provider and will comply with the GST laws of India.

However, there are some exceptions being provided for intermediaries. Those intermediaries who fulfill following conditions, namely ­–

(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 authorize 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 non-taxable online recipient and the supplier of such services;

(c) the intermediary involved in the supply does not authorize delivery; and

(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.

will be exempt from complying GST laws.

To comply with law of GST, service provider sitting in Non-taxable territory have to go through following:

• He will apply for single registration under Simplified Registration Scheme notified by Central Government. Alternatively, he can appoint any person in India to comply with registration provisions. If he already has a representative located in India, then whole responsibility lies on this representative.
• He will pay IGST on supplies made to non-taxable online recipient. Please note, the person who is responsible for registration under this law will wholly responsible for payment of IGST whether he is service provider himself or his appointed representative.

How to determine that particular transaction belongs to Indian origin for OIDAR services?

In Section 13(12) of IGST, it is being provided that Person receiving OIDAR services shall be deemed to be located in taxable territory of India, if any of two non-contradictory conditions are satisfied (i.e. any two conditions satisfied for which there is no contradiction)

1. Location of address of recipient provided by him through internet is in the taxable territory;
2. the credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory;
3. the billing address of the recipient of services is in the taxable territory;
4. the internet protocol address of the device used by the recipient of services is in the taxable territory;
5. the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory;
6. the country code of the subscriber identity module card used by the recipient of services is of taxable territory;
7. the location of the fixed land line through which the service is received by the recipient is in the taxable territory.

Now the question is why the person sitting Out of India will take this headache to register for GST in India even if he is liable to GST under International recognized Consumption based Indirect tax System?

Answer: Every country has its own laws for Information Technology and related services. Every country has rights to provide/block access to a particular website or any other medium through which these services are provided.

Government of India is closely monitoring all those websites who are earning huge revenues from Indian customers. If government found that such website owners are not complying with its laws, then it has the power to block that particular website in India and hence to stop generation of such income.

Now, it’s totally depends on website owner, whether he wants to do business in India or not.