OIDAR Services Under GST: Understanding Tax Implication And Compliance Guidelines

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Published Date:  10-01-2024   Author:   yash-elwadhi
captainbiz oidar services under gst understanding tax implication and compliance guidelines

In the rapidly evolving landscape of digital services, the taxation framework has had to adapt to keep pace. One significant aspect of this adaptation is the taxation of Online Information Database Access and Retrieval (OIDAR) services under the Goods and Services Tax (GST) regime. This blog aims to unravel the complexities surrounding OIDAR services, shedding light on the tax implications and the compliance guidelines that businesses engaged in this domain should adhere to.

Understanding OIDAR Services 

OIDAR services involve the delivery of services over the Internet with minimal human intervention. The key characteristic is that the recipient receives the service online without any physical interaction with the service provider. The inclusion of OIDAR services under GST is a step towards creating a level playing field for domestic service providers in terms of cost.

Here are examples of OIDAR (Online Information and Database Access or Retrieval) services:

  1. Downloadable Software and Applications:  Providing access to software and applications that can be downloaded or accessed online.
  1. Cloud Services:   Offering services related to cloud computing, including storage, processing power, and data hosting.
  1. Online Gaming Services: Providing platforms and services for online gaming, including multiplayer games, virtual environments, and in-game purchases.
  1. Digital Content Distribution: Supplying digital content such as e-books, music, videos, and images through online platforms.
  1. Online Education and Training: Delivering online educational courses, training programs, and certification courses.
  1. Web Hosting and Maintenance: Provide web hosting services and remotely manage the maintenance of programs and equipment.
  1. Online Advertising Services: Supplying advertising space on the internet, including banner ads, sponsored content, and other digital marketing services.
  1. Electronic Data Interchange (EDI) Services: Facilitating the electronic exchange of business documents between different companies.
  1. Search Engine Services: Offering search engine services, including search algorithms, indexing, and search result displays.
  1. Digital Data Storage Services: Providing online storage solutions for digital data, including cloud-based storage services.

GST Rate and HSN Code for OIDAR Services

The Integrated Goods and Services Tax (IGST) rate for the sale of digital services in India, including OIDAR services, is 18%. However, an exception exists for the online sale of e-books, classified under HSN code 9984. This particular service is subject to a reduced GST rate of 5%.

Who Must Register for OIDAR Services under GST?

Under GST, it is mandatory for all entities providing OIDAR services in India, irrespective of their turnover, to register. This includes OIDAR service providers located outside India, offering services to residents in India. In cases where the service provider is in a non-taxable territory, and the recipient is a non-taxable online recipient (NTOR), the intermediary supplying services must register and pay GST.

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Also Read: OIDAR Services under GST: Understanding Tax Implication and Compliance Guidelines

OIDAR GST Registration Process: Step-by-Step Guide

  1.   Visit the GST Portal: Go to the GST portal and click on ‘Services,’ then ‘Registration’ in the top menu.
  2.   Select New Registration: Choose ‘New Registration’ and select ‘Taxpayer’ as the type.
  3.   Fill Basic Details: Provide legal name, PAN, email address, and mobile number. Verify with OTP.
  4.   Application Reference Number (ARN): After verification, receive an ARN on your email and mobile. Click on the ‘ARN’ link to continue.
  5.   OTP Validation: Enter both email and mobile OTPs. A Temporary Reference Number (TRN) will be generated.
  6.   Proceed with TRN: Select ‘PROCEED’ and fill in the details, including business details, authorised signatory details, bank account details, and verification.
  7.   Upload Documents: Upload necessary documents like PAN, Aadhaar, and address proof.
  8.   Acknowledgement: Receive an acknowledgement after submitting the form. The application will be processed, and you’ll be notified upon approval.

Also ReadBeginners Guide to GST Registration

Place of Supply in case of OIDAR Services

The determination of the place of supply for OIDAR (Online Information and Database Access or Retrieval) services under GST is crucial as it helps in understanding which type of GST (CGST/SGST/IGST) is applicable. The place of supply for OIDAR services is governed by the following rules:

1.   B2B Transactions (Business to Business): 

If the recipient of OIDAR services is a registered business entity, the place of supply is the location of the recipient’s business establishment. For example, if an Indian business (registered for GST) avails OIDAR services, the place of supply is the location of that Indian business.

2.   B2C Transactions (Business to Consumer):

 If the recipient of OIDAR services is an individual or an unregistered business (B2C), the place of supply is the location of the recipient’s usual place of residence. For example, if an individual in India avails OIDAR services, the place of supply is the location where that individual resides.

It’s essential for OIDAR service providers to correctly determine the place of supply, as it determines the applicable GST. In B2B transactions, the Integrated Goods and Services Tax (IGST) is applicable, while in B2C transactions, the Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) or Union Territory Goods and Services Tax (UTGST) may be applicable based on the location of the recipient.

Date of Supply

The date of supply for OIDAR (Online Information and Database Access or Retrieval) services under GST is helpful for determining when the liability to pay tax arises. The date of supply is governed by specific rules outlined in the GST law. Here are the key points regarding the date of supply for OIDAR services:

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  1.   B2B Transactions (Business to Business): 

For OIDAR services provided to a registered business (B2B), the date of supply is the earlier of the following:

  •     The date of issuance of the invoice.
  •     The date on which the supplier receives the payment.
  •     The date immediately following sixty days from the date of issue of the invoice.
  1.   B2C Transactions (Business to Consumer): 

For OIDAR services provided to an individual or an unregistered business (B2C), the date of supply is the earlier of the following:

  •     The date of issuance of the invoice.
  •     The date on which the supplier receives the payment.
  1.   In the absence of an invoice: 
  •     If an invoice is not issued within the prescribed period, the date of supply is the date on which the recipient avails the service.

Understanding the date of supply is essential for determining the tax liability and ensuring compliance with GST regulations. It provides clarity on when the supplier should account for the transaction and when the recipient is liable to pay GST on the OIDAR services received.

Also Read: Special Considerations for OIDAR (Online Information and Database Access or Retrieval) Services in GSTR-5

Frequently Asked Questions

1.What is OIDAR under GST? 

OIDAR stands for ‘Online Information and Database Access or Retrieval’ under GST. It includes electronically supplied services delivered over the internet or an electronic network with minimal human intervention.

2.Are all online services considered OIDAR? 

No, only specific services like online advertising, cloud computing, digital content distribution, and software as a service (SaaS) fall under the category of OIDAR services.

3.Is GST registration mandatory for OIDAR service providers? 

Yes, GST registration is mandatory for businesses providing OIDAR services in India, regardless of their place of establishment.

4.Can a non resident OIDAR service provider claim Input Tax Credit (ITC)? 

No, non resident OIDAR service providers are not eligible to claim Input Tax Credit as per existing provisions.

5.What is the GST rate for OIDAR services? 

The IGST rate for OIDAR services is 18%, except for the online sale of e books, which falls under HSN code 9984 and is subject to a reduced rate of 5%.

6.How can OIDAR service providers register under GST? 

OIDAR service providers can register under GST by visiting the GST portal, filling in the necessary details, and submitting required documents such as PAN, Aadhaar, and address proof.

7.Is there any specific information required during GST registration for OIDAR services? 

Yes, additional information such as Place of Supply (PoS), Type of Service, etc., related to OIDAR services is mandatory during the registration process.

8. Who can be an authorized signatory for OIDAR services? 

The authorized signatory for OIDAR services must be a resident of India with a valid PAN card. They should be authorized by the OIDAR service provider to act on their behalf in all GST related matters.

9. What are some examples of OIDAR services? 

Examples include online advertising, cloud computing services, digital content distribution, e books, software as a service (SaaS), and online gaming.

10.How can one check the GST number of an OIDAR service provider? 

To check the GST number (GSTIN) of an OIDAR service provider in India, visit the GST portal, select the ‘Search Taxpayer’ tab, enter the GSTIN or trade name, and click ‘Search’.

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Yash Elwadhi

Yash Elwadhi is a highly skilled and experienced finance content writer with a proven track record of providing insightful and engaging content to a wide range of clients in the financial industry. He has collaborated with prominent financial institutions, fintech companies, and wealth management firms, and is known for his ability to convey complex financial concepts in a clear and engaging manner. Yash is committed to delivering high-quality content that adds value to his clients' target audience and helps them achieve their financial goals.

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