OIDAR Services under GST
Definition of OIDAR: – OIDAR stand for “Online Information Database Access and Retrieval services.” OIDAR services under GST is defines in IGST Act. According to IGST Act, Online information database access and retrieval service (OIDAR services) mean the services whose delivery is mediated with the help of information technology over the internet or an electronic network. The supply of OIDAR services automated without or minimum human intervention.
In general terms, OIDAR services provided through the medium of internet / electronic networks and without physical interface between receiver of services and provider of such services. The supply of OIDAR services is automated and impossible to ensure in the absence of Information technology. Thus every service that is availed online cannot be constructed as OIDAR services.
Following type of services included under the definition of OIDAR services:-
1) Advertising on the internet
2) Cloud services
3) Provision of e-book, music, movie, software and other intangible services through internet or telecommunication networks
4) In electronic form through computer network providing data or information services (retrievable or otherwise).
5) Online supplier of digital content such as movies, television shows and music etc
6) Digital data storage services
7) Online gaming
For example, if “A” download an e-book for a consideration then “A” is a receiver of OIDAR Services under GST.
Taxability of OIDAR Services: – If OIDAR service provider located outside India and provides services to a GST registered person (business entity) located in India then RCM (Reverse charge mechanism) provision will be applicable. The registered person located in India will be liable to pay GST under reverse charge.
If OIDAR service provider located outside India and provides service to an unregister person then section 14(1) of IGST act will be applicable. According to section 14(1) of IGST Act, if provider of OIDAR services located in non-taxable territory provides the OIDAR services to “Non-taxable online recipient” then foreign supplier liable for payment of GST.
Non-Taxable Online Recipient:- Section 2(26) of the IGST Act define the “Non Taxable Online Recipient”. As per section following persons are cover under the definition of “Non Taxable Online Recipient”.
1) Any Government, local authority, Government authority, an individual or any other person not register under GST and
2) Located in the taxable territory and
3) OIDAR services received for purpose other than commerce, industry or any other business or profession purpose.
Government Authority mentioned in the definition of “Non taxable online recipient” is refers the following:-
1) An authority or a board or any other body setup by an act of Parliament or a state Legislature or
2) Established by any Government
with 90% or more holding or participation by way of equity or control. The purpose of such establishment must be carrying any function entrusted to a municipality under article 243W of the Constitution.
OIDAR services provides through Intermediary: – Sometimes its happen that intermediary provide OIDAR services on behalf of supplier. If OIDAR service provider and Intermediary both are located in non-taxable territory then section 14(1) of IGST will be applicable. According to section 14(1), the intermediary shall be deemed recipient of such services from supplier and supplying the same services to the non-taxable online recipient. Therefore, such intermediary shall be liable for payment of tax.
However, intermediary shall be exempt from payment of tax if following conditions are satisfied:-
1) The Invoice or bill clarify indicate the nature of service
2) The Invoice or bill should mention that its supplier is located in non-taxable territory
3) Payment for services by non-taxable online recipient directly done to supplier of such services. The Intermediary neither collects nor process payment in any manner.
4) The intermediary does not authorise delivery and
5) Terms and conditions of the supply are set by supplier of services instead of intermediary.
Registration under OIDAR:- According to Section 24 of CGST Act, there is mandatory registration in respect of OIDAR service provider who provide OIDAR services from non-taxable territory to an unregister person in India. The benefits of threshold limit are not applicable on such OIDAR service provider. OIDAR service providers can apply for GST Registration using the Form REG – 10. The provider of OIDAR services under GST shall take registration at Principal Commissioner of Central Tax, Bangalore west who has been the designated for grant registration.
Representative in India: – If there is any representative of foreign supplier in India or taxable territory for any purpose then such representative in India shall get registration of OIDAR service providers. Such representative in India also pays tax (IGST) on behalf of OIDAR service provider.
In case the overseas supplier does not have a physical presence or does not have a representative for any purpose in the taxable territory then he shall appoint a person for the purpose of tax payment.
GST Returns for OIDAR service providers: – OIDAR service provider who provides services from non taxable territory has to file a monthly return in Form GSTR 5A. The due date for filling GST return in Form GSTR 5A is 20th of the next month.
In case if during the month the service providers do not have any outward supplies then service provider has to file nil return.
Form GSTR 5A has following four sections:-
- Taxable Outward Supplies made to a consumer (B2C Supplies) in India
- Amendments to taxable outward supplies to non-taxable persons in India
- Calculation of Interest, penalty or any other amount
- Tax, Interest, Late fee and other amounts payable and paid
The India based OIDAR service providers have to file the regular return in Form GSTR 1 and GSTR 3B.
Place of supply for OIDAR services under GST: – As per section 13 of IGST Act, place of supply for OIDAR services shall be location of the service recipient. Location of a person shall be in taxable territory if any of following two non-contradictory conditions is satisfied:-
1) The service recipient’s address is in the taxable territory.
2) The card such as credit or debit or store value or smart or any other card from which the service recipient done payment has been issued in taxable territory.
3) Billing address of service recipient is in taxable territory.
4) The IP (Internet Protocol) address used by service recipient’s device is in taxable territory.
5) The bank account of service recipient through which payment done is maintained in the taxable territory.
6) The country code of the subscriber identity module card used by service recipient is in the taxable territory.
7) The fixed land line location through which the service is received is in taxable territory.
General Exemption Notification :- The Notification No 9/2017 dated 28th June 2017 exempts the services received from provider of services located in non-taxable territory in case of following service recipients:-
1) Central Government, State Government, Union Territory, Local Authority or Governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession;
2) Trust for purpose of carrying out charitable activities; or
3) Service recipient located in non-taxable territory
However, this general exemption shall not apply if OIDAR services received by persons mentioned in point no 1 and 2.
Examples of OIDAR services:-
| Services | Provided through Internet | Service Automated | OIDAR
Services |
| Provider download software manually | Yes | No | No |
| Software automatically download by provider’s system | Yes | Yes | Yes |
| Software download automatically
from site |
Yes | Yes | Yes |
| E-book for automatic download | Yes | Yes | Yes |
| Online Gaming | Yes | Yes | Yes |
| PDF converter | Yes | No | No |
| Cloud Storage services | Yes | No | No |
Input Tax Credit: – Input tax credit can be taken by registered taxpayers only if they are eligible to take Input Tax credit. If the taxes are paid on RCM basis then the GST registered person eligible to take credit.
Also See, “GST Refund on Inverted duty Structure”
For any query you can write at taxhouseindia@gmail.com Before making any decisions do consult with your professional or tax advisor.
Don’t forget to subscribe us for Free Tax Updates through mail.
Also Join Our Telegram Channel by clicking here for Free Tax Updates.