Online Information Database Access and Retrieval Services

Online Information Database Access and Retrieval services (hereinafter referred to as OIDAR) has been specified as a special category of services under the GST law. OIDAR are the services provided through the platform of internet wherein the services are being supplied and received online without any physical interaction between the supplied and recipient. In simple words the OIDAR services are the services received online through the medium of internet.

Let’s understand the concept of OIDAR services according to the GST law:

CONCEPT OF OIDAR SERVICES UNDER GST

The Section 2(17) of Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as (“IGST Act or Act”) defines OIDAR as services related to information technology such as advertising, digital data storage, online gaming, cloud services, etc. rendered over the internet with minimal human interaction. The extract of the Section 2(17) of the IGST Act has been given below:

“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 -

Advertising on the internet;
Providing cloud services;
Provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet;
Providing data or information, retrievable or otherwise, to any person in electronic form through a computer network;
Online supplies of digital content (movies, television shows, music and the like);
Digital data storage; and
Online gaming;”

As discussed, OIDAR services are being provided on the online platform, hence they can be provided from any place in the whole world whether taxable territory or non-taxable territory. It is not necessary that the OIDAR services provider is located in the taxable territory.

Now here come the question that if the supplier of these services is located outside India in that case what will the place of supply of the services and how the tax liability will be discharged.

Also Read: TCS Refund Under GST: Impact on E-commerce and Other Businesses

PLACE OF SUPPLY IN CASE OF OIDAR SERVICE

According to the Section 13(12) of IGST, 2017, the place of supply of the OIDAR services will always be the location of the recipient of the services, i.e., India, irrespective of the whether the supplier of such services is located in India or outside India. The extract of the Section 13(12) of IGST Act has been given below:

“(12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services.”

TAX AND TAX LIABILITY IN THE CASE OF OIDAR SERVICES

The supply of OIDAR services will attract GST under IGST at the rate of 18%.

There can be difference scenarios to discharge the liability in the case of OIDAR services:

Where the supplier is located in India and the recipient registered under GST is located in India then the tax liability will be discharge under the forward charge mechanism. The supplier of the services would be liable to pay the tax under the forward charge and undertake all other necessary compliances.
Where the supplier is located outside India and the recipient registered under GST is located in India then the tax liability will be discharge under the reverse charge mechanism. The Recipient of the services located in India would be liable to pay the tax under the reverse charge and undertake all other necessary compliances.
Where the supplier is located outside India and the recipient not registered in GST is located in India then the supplier of such services will be liable to pay the tax according to the Section 14(1) of the IGST Act. The extract of the Section 14(1) of the IGST Act, 2017:

“(1) 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.”

In context of the aforesaid provision, the non-taxable online recipient is any government, local or governmental authority, any individual or any other person who is not registered under the GST Act, and receives the OIDAR services through the internet.

In this regard, the Section 2(16) of IGST Act, 2017 has been prescribed wherein the term Non-taxable Online Recipient has been defined:

“(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.”

Now the question arises that the how the supplier of the services located outside India would discharge his liability under GST.

REGISTRATION FOR THE SUPPLIER OF OIDAR SERVICE

The Section 24(xi) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”) provides that where the supplier of OIDAR services located outside India is rendering such services to non-taxable online recipient located in India is required to compulsorily register under the GST irrespective of the threshold limit of turnover is more than INR 20 Lakhs or not. The extract of the Section 24(xi) of the CGST Act is given below:

Also Read: GST Compliance Checklist

“(xi) every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person;”

In simple words, it is mandatory for the Supplier of the OIDAR services who is located outside India to register in India if he is providing such services to an unregistered person located in India.

For the purpose of registration, according to the Second and third proviso of the Section 14 of the IGST Act, 2017, the person who is representing the supplier of the OIDAR services in India may get the registration and discharge all the tax liability on behalf of the supplier. However, in case the supplier does not have any representative in India then he may appoint a person in this regard who will get himself registered and discharge the tax liability under GST on behalf of the supplier. The extract of the second and third proviso of the Section 14 of the IGST Act, 2017 is given below:

“Provided that any person located 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:

Provided further that 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.”

Further, such supplier has to file the monthly return and discharge the tax liability with regard to the supply of OIDAR services under the FORM GSTR 5A before 20th of the succeeding month according to the Rule 64 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as “CGST Rules”). The Rule 64 of the CGST Rules is given under:

“64. Form and manner of submission of return by persons providing online information and data base access or retrieval services and by persons supplying online money gaming from a place outside India to a person in India.- Every registered person either providing online money gaming from a place outside India to a person in India, or providing online information and data base access or retrieval services from a place outside India to a non-taxable online recipient referred to in section 14 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017) or to a registered person other than a non-taxable online recipient, shall file return in FORM GSTR-5A on or before the twentieth day of the month succeeding the calendar month or part thereof.”

Therefore, the foreign companies like Google, YouTube, Facebook, Twitter providing OIDAR services in India especially to the unregistered person is liable to pay the tax under IGST on such services. Further, it is necessary for these companies to get registered under GST and discharge the output tax liability with respect to the supply of OIDAR services..