Taxing the Digital World: OIDAR Services Back in the Spotlight from October 01, 2023

What is OIDAR?
Online Information Database Access and Retrieval services, aka “OIDAR” is a category of services provided through the medium of internet and received by the recipient online without having any physical interface with the supplier of such services.

For the service to be an OIDAR Service, both the below mentioned conditions need to be satisfied:

1. Delivery is mediated through internet or an electronic network.
2. The supply is impossible to ensure in the absence of information technology. (The Finance Act, 2023 omitted the words “essentially automated and involving minimal human intervention”, and this will be effective from 01-10-2023).

Below are few examples of OIDAR Services:

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

How is OIDAR’s Treatment Different from Other Services?

• The nature of OIDAR service is such that it can be provided online from a remote location outside the taxable territory.
• A similar service provided by an Indian Service Provider, from within the taxable territory, to recipients in India would be taxable.
• Such services received by a registered entity in India would also be taxable under reverse charge.
• The overseas suppliers of such services would have an unfair tax advantage, should the services provided by them be left out of the tax net.
• At the same time, since the service provider is located overseas and may not be having presence in India, the compliance verification mechanism becomes difficult.
• It is in such circumstances, that the Government has come out with a simplified scheme of registration for such service providers located outside India.

In Case the Service Provider is Located Overseas, Who Should Register and pay GST for OIDAR Services?

• In respect of import of OIDAR by non-taxable recipients, the supplier located outside India will be responsible for payment of taxes.
• The service provider (or intermediary as the case may be) will be required to take a single registration for paying IGST under the Simplified Registration Scheme to be notified by the Government.
• Either he will have to take registration or he will have to appoint a person in India to pay GST.

Here is How the Finance Act 2023 has Broadened the Scope of OIDAR Services:

• The definition of ‘non-taxable online recipient’ is amended. Now, it means an unregistered person receiving OIDAR services located in the taxable territory.
• Also, the unregistered person includes the TDS deduct or registered u/s 51 of the CGST Act.
• These changes will be effective from 01-10-23.

Snapshot Applicability Matrix