What is OIDAR service under GST and examples?
OIDAR services refer to services delivered through the internet, where the recipient receives the service online without any physical interaction with the service provider. The inclusion of OIDAR services under GST aims to provide a level playing field for domestic service providers in terms of cost.
Examples of OIDAR services include:
- Downloading or accessing software and applications.
- Providing cloud services.
- Providing online gaming services.
- Supplying digital content like e-books, music, videos, and images.
- Providing online education, training, and certification courses.
- Providing web hosting, and remotely managing maintenance of programs and equipments.
- Supplying advertising space on the internet.
- Providing electronic data interchange (EDI) services.
- Providing search-engine services.
- Providing digital data storage services.
If an online service provider does not have an office in India, they must appoint an agent to handle tax payments. Additionally, if a non-taxable online recipient receives online services from a non-taxable territory, the supplier in that territory must pay the tax according to Section 14 of the Integrated Goods and Services Tax (IGST) Act.
Place of supply of OIDAR Service:
The place of supply of OIDAR services shall be the location of the recipient of services.
Thus, under this Section, any recipient of OIDAR services is deemed to be in the taxable territory – if any two of the following non-contradictory conditions are satisfied:
- The Recipient gives an Indian address through Internet.
- The payment is settled by an Indian credit card /debit card/other card.
- The recipient has Indian billing address.
- The computer used by the recipient has Indian IP address.
- The recipient uses an Indian bank account for payment.
- The country code of the subscriber identity module card used by the recipient of service is of India.
- The recipient receives the service through an Indian fixed land line.
GST applicability on OIDAR services:
The taxability of OIDAR services is dependent on the location of the recipient and GST liability is determined accordingly:
- If both the supplier and the recipient, are in India, then GST will be applicable and will be charged on the basis of forward charges.
- If the supplier is outside the taxable territory, and the recipient located in India is registered under GST, then GST will be applicable and payment of GST will be on reverse charge.
- If the recipient is residing in India, but is not registered under GST, and the supplier is outside the boundaries of India, then GST will be applicable, and payment for goods and service tax will be on forward charge basis.
To determine which type of GST (CGST, SGST, or IGST) is applicable, it is essential to determine the place of supply for OIDAR (Online Information and Database Access or Retrieval) services under GST. The following regulations apply to the location of supply for OIDAR services:
Business-to-business (B2B) transactions:
- The place of supply for OIDAR services is the receiver’s business premises if the beneficiary is a registered business entity.
- For instance, the place of supply is the location of an Indian company that is registered for GST and uses OIDAR services.
Business to Consumer (B2C) Transactions:
- The location of the recipient’s typical place of residence serves as the place of supply for OIDAR services if the recipient is an individual or an unregistered business (B2C).
- When someone in India uses OIDAR services, for instance, the point of supply is where that person lives. Since it establishes the applicable GST, OIDAR service providers must accurately identify the place of supply.
- While the Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), or Union Territory Goods and Services Tax (UTGST) may be applicable depending on the recipient’s location, the Integrated Goods and Services Tax (IGST) is applicable in business-to-business (B2B) transactions.
OIDAR GST Rate and HSN Code:
- Both OIDAR service providers based in India and those outside the country are subject to the 18% IGST levy on the sale of digital services.
- The online sale of e-books is an exemption, though. Under the GST Tariff, this service is categorised under HSN code 9984 (Telecommunications, Broadcasting, and Information Supply Services) and is eligible for a 5% reduction in rate.