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GST on Online Services Received from Outside India: Everything to Know about Taxability of OIDAR

Recently, it has been in news that services of online courses/songs/OTT/cloud services etc. availed by the individuals in India from outside India has been brought under GST w.e.f. 01.10.2023 due to issuance of Notification No. 12/2023 dated 26th September, 2023 & changes made in IGST Act vide Finance Act, 2023 making them effective from 01.10.2023. In GST parlance, these kinds of services are called online information and Database Access or Retrieval services (OIDAR).


In this article, we will carry out comprehensive discussion regarding Taxability of OIDAR services under GST and impact of changes.





Area Covered in the Article:

1. Meaning of OIDAR Services

2. Meaning of Non-Taxable Online Recipient

3. Various Legal Provisions (Special Provisions, RCM, Exemption Notification)

4. Taxability of Multiple Scenarios (Chart & Explanation)



Meaning of OIDAR Services (Section 2(17) of IGST Act)


The definition of OIDAR, it tries to cover all kind of services which are being provided using internet or electronic media like You-Tube, Cloud Services, Online Courses, E-Books etc. as prescribed in Section 2(17) of IGST Act


"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 impossible to ensure in the absence of information technology and includes electronic services such as,-

( i ) advertising on the internet;

(ii) providing cloud services;

(iii) provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet;

(iv) providing data or information, retrievable or otherwise, to any person in electronic form through a computer network;

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

(vi) digital data storage; and

(vii) online gaming, excluding the online money gaming as defined in clause (80B) of section 2 of the Central Goods and Services Tax Act, 2017;


Earlier the words “essentially automated and involving minimal human intervention” was also there in the definition of OIDAR , but the same has been deleted by Finance Act, 2023 to remove any disputes and widen the scope of the Definition of OIDAR Services. By doing this, services like online classes by faculty from outside India are also being covered without any dispute.


Further, Online money gaming has been excluded from the definition of OIDAR as specific provisions have been prescribed for Online Money Gaming (For details please read at https://www.fabgyan.com/post/gst-on-online-games-everything-to-know-about).


2. Meaning of Non-Taxable Online Recipient (NTOR) (Section 2(16):


Earlier, NTOR was defined as:


NTOR 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.


Now vide Finance Act, 2023 Definition of NTOR has been changed, now it means:


"Non-Taxable online Recipient" means any unregistered person receiving online information and database access or retrieval services located in taxable territory.

Explanation.—For the purposes of this clause, the expression "unregistered person" includes a person registered solely in terms of clause (vi) of section 24 of the Central Goods and Services Tax Act, 2017;'


Accordingly, it has now widened the scope of NTOR as now Un-Registered Persons availing such services for their business purpose are also covered. Further, Persons registered for compliance for TDS provisions under Section 51 will also be considered as Un-Registered Person.


Various Legal Provisions Related to OIDAR


As per the provisions contained in Section 7(1) (b) of the CGST Act, 2017, import of services for a consideration whether or not in the course or furtherance of business shall be considered as a supply. Therefore, Business Test is not required in case of Import of Service.


Now we will discuss Legal Provisions regarding Taxability of OIDAR Service.


Special Provisions related to Taxability of OIDAR Services (Section 14 of IGST Act)


1. As per Section 14 of IGST Act, in case OIDAR service is provided to the Non Taxable Online Recipient, GST needs to be discharged by the Person providing such services from a location outside India.


2. Further, in case some intermediary likes YouTube etc. are involved in arranging or facilitating such service, in that case, such intermediary needs to discharge GST except where following conditions are satisfied:

(a) On the Invoice of the supply, Intermediary clearly identifies the service in question and its supplier in non-taxable territory;

(b) 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) Intermediary involved in the supply does not authorise 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.


3. The supplier/intermediary of OIDAR shall for payment of integrated tax take a single registration under the Simplified Registration Scheme.


4. Any person located in the taxable territory representing such supplier for any purpose in the taxable territory shall get registered and pay integrated tax on behalf of the supplier. In case, such 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.


RCM on Import of Service


As per Notification No. 10/2017 IGST (Rate) as amended, any person receiving any service from outside India other than NTOR is required pay GST under RCM.

Sl. No.

Category of Supply of Services

Supplier of service

Recipient of Service

(1)

(2)

(3)

(4)

1

Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient.

Any person located in a non-taxable territory

Any person located in the taxable territory other than non-taxable online recipient.

Exemption Notification


As per Notification No. 9/2017-IGST (Rate) as amended, following service is exempt


Services received from a provider of service located in a non-taxable territory by –


(a) the Central Government, State Government, Union territory, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession;


(b) an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities; or


Provided that the exemption shall not apply to –(i) online information and database access or retrieval services received by persons specified in item (a) or item (b).


4. Discussion of Multiple Scenarios


OIDAR Service Provider is outside India and Recipient is in India (Please also see chart as presented in starting of the article

S.No.

Scenario

Before 01.10.2023

After 01.10.2023

1

OIDAR received by Registered Person

It will fall under RCM as per Notification No. 10/2017.

No Change

2

OIDAR Service as received by Un-Registered Individual for Personal Reasons like Entertainment

Covered under Forward Charge

No Change

3

OIDAR Service as received by Un-Registered Individual for Business Reasons

He needs to take Registration as covered under RCM as per Notification 10/2017 as Exemption Notification Not available and also does not fall under definition of NTOR.

Under Forward Charge by service provider as now covered under Non Taxable Online Recipient .

4

OIDAR Service as received by Un-Registered Partnership/Company for Business Reasons

It needs to take Registration as covered under RCM as per Notification 10/2017 as Exemption Notification is not available and also does not fall under definition of NTOR.

Under Forward Charge by service provider as now covered under NTOR.

Non- OIDAR Service Provider is outside India and Recipient is in India (Please also see chart as presented in starting of the article



S.No.

Scenario

Before 01.10.2023

After 01.10.2023

1

Non-OIDAR received by Registered Person

RCM

RCM

2

Non-OIDAR Service as received by Un-Registered Individual for Personal Reasons like Entertainment

Exempt

Exempt

3

Non-OIDAR Service as received by Un-Registered Individual for Business Reasons

RCM

RCM

4

Non-OIDAR Service as received by Un-Registered Company/Partnership for Business Reasons

RCM

RCM

From above scenarios we can also analyse the services which were earlier Non-OIDAR and has now been covered in OIDAR Services like Online courses which were exempt earlier but now has been covered under Forward Charge.


Service Provider is in India and Recipient is also in India

In this scenario, Taxability needs to be discharged by the Supplier if applicable under normal provisions of GST.


Service Provider is in India and Recipient is outside India

This scenario will cover in the definition of Export of Service if all other conditions are satisfied.



Happy Reading !!! Happy Learning !!!




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Disclaimer: We have taken due care to the best of our knowledge while explaining the provisions surrounding the issue purely for informational/academic purpose. It should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.


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