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All about OIDAR Services

Online Information and Data Access or Retrieval Services

Business today takes a variety of forms, with many of them residing on the internet. Many of such business do not require human intervention, the products of these businesses are available immediately for download or streaming. These businesses have eliminated the infrastructure and operational overheads for launching e-products and can typically run into several thousands of dollars. In general these products are classified as ‘Online Information and Data Access or Retrieval Services’ (OIDAR).

These businesses having deeper and deeper penetration in B2B and B2C segments with increasing speed of internet. These days people are downloading music, study materials, watching streaming videos, playing online games and what not.

The transactions under this emerging industry are extremely dynamic and frequent cross border transactions makes it more complicated. It was felt that the general provisions of taxation will not alone sufficient to deal with complexity of its business. Therefore a separate set of provisions were promulgated in Service tax laws and now in CGST and IGST Acts.

The provisions under the GST Laws are primarily dealing with:

1.   Determination of OIDAR transactions;

2.   Place of supply;

3.   Time of supply;

4.   Person liable to pay GST;

5.   Registration of OIDAR Service provider

6.   Returns filed by Overseas OIDAR Service providers.

1.   Determination of OIDAR transactions

There is no confusion that OIDAR products are services not goods. To tax a transaction it is essential to understand, whether a service is OIDAR or not, the Act provides definition and also the clarifications made under Service Tax is very important for determination, as the definition of OIDAR provided under the Section 2(17) of IGST Act, 2017 is identical with what it was given under rule 2(1)(ccd) of Service Tax Rules.

1.1 Definition of OIDAR services: Section 2(17) of IGST Act, 2017

“OIDAR 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,––

(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;

Definition contains two parts

The above definition is in two parts, part one is providing the definition of OIDAR and part two provides inclusion of seven specified services.

a.   Defining part:

“OIDAR Services” means services whose delivery is mediated by information technology over the internet or an electronic network andthe nature of which renders their supply essentially automated and involving minimal human intervention and impossible to ensure in the absence of information technology.

Characteristics of OIDAR:

For an OIDAR Service a service must have to qualify two cumulative conditions, in the absence of one conditions, the service will not be OIDAR.

(a) The services shall be provided, essentially by use of information technology over the internet or an electronic network;  and

(b) The nature of such services renders their supply essentially automated and involving minimal human intervention.

The use of information technology is essential with an automated or almost automated supply. Where the supply is tailor made and organized/performed only after efforts of human intervention shall not be treated as OIDAR.

Example:

Website providing legal and taxation Support:

For an example: a website provided legal and taxation support to its subscribers, where it provided its member to access latest law/rules/regulation and court orders and also provides tailor-made legal opinion. The services provided in relation to access of latest law/rules/regulations, there is no human intervention, thus it will fall under OIDAR. The formulation of a Legal opinion will require intensive research which cannot be done by artificial intelligence, it will require a human interventions to work on given circumstances, thus will not fall under the definition of OIDAR.

Thus for these kind of websites, it will be pragmatic to segregate these two services and charge them separately, providing one service complimentary or free with other services, will lead complication.

b.   Inclusive part:

OIDAR Service includes the services specified therein.

The definition specifies various services which will be included in the scope of OIDAR these services are:

(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;

1.2 Clarification issued by CBEC regarding OIDAR

CBEC has issued certain clarification regarding OIDAR via The CBEC vide their circular No. 202/1212016-5T in the form of question answer form. Some of the relevant questionnaires are also relevant for GST are produced as below:

a.   Do OIDAR services include all services mediated by information technology over internet or electronic network?

Clarification:Using the internet, or some electronic means of communication, just to communicate or facilitate outcome of service does not always mean that a business is providing OIDAR services.

b.   What services would NOT be considered as OIDAR services?

Clarification:

i. Supplies of goods, where the order and processing is done electronically

ii. Supplies of physical books, newsletters, newspapers or journals

iii. Services of lawyers and financial consultants who advise clients through email

iv. Booking services or tickets to entertainment events, hotel accommodation or car hire

v. Educational or professional courses, where the content is delivered by a teacher over the internet or an electronic network (in other words, using a remote link)

vi. Offline physical repair services of computer equipment

vii.Advertising services in newspapers, on posters and on television

c.   What type of services will be covered under OIDAR services?

Clarification:

OIDAR services covers services which are automatically delivered over the internet, or an electronic network, where there is minimal or no human intervention. In practice, this can be either:

i. where the provision of the digital content is entirely automatic e.g., a consumer clicks the ‘Buy Now’ button on a website and either:

the content downloads onto the consumers device, orthe consumer receives an automated e-mail containing the content

ii.where the provision of the digital content is essentially automatic, and the small amount of manual process involved doesn’t change the nature of the supply from an OIDAR service

All ‘electronic services’ that are provided in the ways outlined above are OIDAR services.

d.   Examples of services whether or not OIDAR services



2. Place of Supply shall be the location of recipient:

The place of supply decided the taxability of the person. Section 13(12) provides with the ‘place of supply’ in respect of online information and database access of retrieval services as below:

The place of supply of OIDAR services shall be the location of the recipient of services.

Conditions for deemed taxable territory:

Section 2(109) “taxable territory” means the territory to which the provisions of this Act apply;

Explanation to the Section 13(12) provides a test of OIDAR received in taxable territory or not as below:

A person receiving OIDAR services shall be deemed to be located in the taxable territory, if any two (02) out of seven (07) of the following non-contradictory conditions are satisfied, namely:––

(a) the location of address presented by the recipient of services through internet is in the taxable territory;

(b) 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;

(c) the billing address of the recipient of services is in the taxable territory;

(d) the internet protocol address of the device used by the recipient of services is in the taxable territory;

(e) the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory;

(f) the country code of the subscriber identity module card used by the recipient of services is of taxable territory;

(g) the location of the fixed land line through which the service is received by the recipient is in the taxable territory.

3. Time of supply of OIDA services

Supply made to the taxable person

The time of supply of services shall be the earliest of the following dates, namely:—

(a) If Invoice issued within thirty days: the date of issue of invoice by the supplier, or the date of receipt of payment, whichever is earlier; or

(b) If the invoice not issued within thirty days: the date of provision of service, or the date of receipt of payment, whichever is earlier;

Supply made to the non-taxable person

In such cases the tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:––

(a) The date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

(b) The date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

In case of supply by associated enterprises, where the supplier of service is located outside India: date of accounting made by recipient or date of payment made whichever is earlier.

4. Person liable to Pay GST

4.1 By Registered person

Reverse charge if OIDAR service received by person registered under GST in India, such will be liable to pay CGST and SGST / IGST under reverse charge mechanism.

4.1 By Supplier/Intermediary where OIDAR Services provided from non-taxable territory to a non registered person

Section 14 provides as under

1. Under the following circumstances the liability to pay IGST on such supply of ODIAR services shall be on the Supplier of services.

a. By any person located in a non-taxable territory; and

b. Received by a non-taxable online recipient:

Intermediary is liable to pay IGST

Sometimes OIDAR products are not owned or belong the portal or app where it is available for sell but such intermediaries are facilitating entire transaction on purchase of such software/music or other OIDAR products.

For example McAfee is available for sale on a web portal which does not belong to McAfee or certain music file available on Apple store or A Cloud space is purchase from one site while the space management of such cloud is being done by another person.

To deal with these situations Section 14 of IGST Act, provides certain guidelines which fix the liabilities of payment of GST under the abovesaid situations.

An Intermediary is liable to pay IGST if the OIDAR services facilitated by the intermediaries located in a non-taxable territory and received by a non-taxable online recipient in general, however under the following circumstances an Intermediary will not liable to pay tax.

(a) the invoice etc issued by such intermediary clearly identifies the service in question and its supplier in non-taxable territory;

(b) the intermediary neither collects/processes payment nor is responsible for the payment between the non-taxable online recipient and the supplier of such services;

(c)  the intermediary does not authorise delivery; and

(d) the general terms and conditions of the supply are not set by the intermediary but by the supplier of services.

Non-taxable online recipient:

Section 2(16) : “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 percent or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution;

6. Registration of OIDAR Service provider

Section 24 of CGST Act, deals with registration provides that every person supplying online information and data base access or retrieval services from a place outside India to a person in India.

Simplified registration scheme

Section 14(2) provides that the supplier of OIDAR services shall, for payment of integrated tax, take a single registration under the Simplified Registration Scheme to be notified by the Government. The Government is to give notification in this regard.

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.

If 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.

Form for registration of Overseas OIDAR Service provider

For obtaining registration by a person supplying OIDAR services from a place outside India to a non-taxable online recipient. A new separate registration form in FORM GST REG-09A would be required to be submitted by any person providing OIDAR services from a place outside India.

6. Returns to be filed by overseas OIDAR Service Provider:

Rule 5A. Form and manner of submission of return by persons providing online information and database access or retrieval services

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.