GST Treatment in India of Cross Border B2C Digital Products Transaction is covered under the OIDAR taxation framework under GST. Online Information Database Access and Retrieval services (OIDAR) is a category of cross border digital products/ services provided through the medium of internet and received by the recipient online without having any physical interface with the supplier of such services. E.g. download of an e-book online for a payment would amount to receipt of OIDAR services by the consumer.
The Integrated Goods and Service Act 2017, defines OIDAR as 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 involving minimal human intervention. These include 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
(vii) Online gaming
The nature of OIDAR services/digital products are such that it can be provided online from a remote location outside the taxable territory. A similar service/digital provided by an Indian entity, from within the taxable territory, to recipients in India would be taxable.
In cases where the supplier of such service is located outside India and the recipient is a business entity (registered person) located in India, the reverse charge mechanism would get triggered and the recipient in India (registered entity under GST) will be liable to pay GST under reverse charge and undertake necessary compliances.
If the supplier is located outside India and the recipient in India is an individual consumer in such cases also, the place of supply would be India and the transaction is amenable to levy of GST.
For such cases the IGST Act provides that on supply of online information and database access or retrieval services by any person located in a non-taxable territory and received by a non-taxable online recipient, the supplier of services located in a non-taxable territory shall be the person liable for paying integrated tax on such supply of services.
Now if an intermediary located outside India arranges or facilitates supply of such service to a non-taxable online recipient in India, the intermediary would be treated as the supplier of the said service, except when the intermediary satisfies the following conditions:
(a) The invoice or customer’s bill or receipt issued by
such intermediary taking part in the supply clearly identifies the service in question and its supplier in
(b) The intermediary involved in the supply does not authorise the charge to the customer or take part in its charge. This means 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 authorise delivery
(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
The supplier (or intermediary) of online information and database access or retrieval services shall, for payment of integrated tax, take a single registration under the Simplified Registration Scheme in Form GST REG-10. The supplier shall take registration at Principal Commissioner of Central Tax, Bengaluru West(India) who has been the designated for grant registration in such cases.
In case there is a person in the taxable territory (India) representing such overseas supplier in the taxable territory for any purpose, such person (representative in India) shall get registered and pay integrated tax on behalf of the supplier.
In case the overseas 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.
“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.
Indicative List of OIDAR Services
- Website supply, web-hosting, distance maintenance of programmers and equipment
(a) Website hosting and webpage hosting
(b) Automated, online and distance maintenance of programmers
(c) Remote systems administration
(d) Online data warehousing where specific data is stored and retrieved electronically
(e) Online supply of on-demand disc space
- Supply of software and updating thereof
(a) Accessing or downloading software (including procurement/accountancy programmers and
anti-virus software) plus updates
(b) Software to block banner adverts, otherwise known as Banner blockers
(c) Download drivers, such as software that interfaces computers with peripheral equipment
(such as printers)
(d) Online automated installation of filters on websites
(e) Online automated installation of firewalls
- Supply of images, text and information and making available of databases
(a) Accessing or downloading desktop themes
(b) Accessing or downloading photographic or pictorial images or screensavers
(c) The digitised content of books and other electronic publications
(d) Subscription to online newspapers and journals
(e) Weblogs and website statistics
(f) Online news, traffic information and weather reports
(g) Online information generated automatically by software from specific data input by the customer, such as legal and financial data, (in particular, data such as continually updated stock market data, in real time)
(h) The provision of advertising space including banner ads on a website/web page
(i) Use of search engines and Internet directories
- Supply of music, films and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific and entertainment broadcasts and events
(a) Accessing or downloading of music on to computers and mobile phones
(b) Accessing or downloading of jingles, excerpts, ringtones, or other sounds
(c) Accessing or downloading of films
(d) Downloading of games on to computers and
(e) Accessing automated online games which are dependent on the Internet, or other similar electronic networks, where players are geographically remote from one another
- Supply of distance teaching
(a) Automated distance teaching dependent on the Internet or similar electronic network to function and the supply of which requires limited or no human intervention. These include virtual classrooms, except where the Internet or similar electronic network is used as a tool simply for communication between the teacher and student
(b) Workbooks completed by pupils online and marked automatically, without human intervention
The place of supply of online information and database access or retrieval services shall be the location of the recipient of services.