OIDAR GST Registration in India – All about Online business by Nonresident in India

 

Introduction

Online Information Database Access and Retrieval services (OIDAR) is a category of services provided through the medium of the internet and received by the recipient online without having any physical interface with the supplier of such services.

The main theme of the online services is that it can be provided from anywhere in the world without having any physical presence in the country. In other words, any person in the world can provide online services in India from a remote location outside India without paying any taxes.

 

Treatment under GST

The services provided from outside India to any person in India can be of two types:

• Online service provided from outside India to registered resident
• Online service provided from outside India to the unregistered person including the individual.

If the services are provided from outside India to a registered person in India, then the transactions shall fall under the reverse charge and the registered person in India shall need to pay the GST.

However, the problem arises when the services are received by the unregistered person; this is because here no person is responsible to pay GST. Therefore, to provide level playing field, the government decided to provide special provisions for the OIDAR services.

 

Definition of OIDAR Service as per IGST Act

The IGST Act 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:

• 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
   
• Online gaming

 

Why OIDAR services require a different treatment than other services?

The nature of OIDAR services 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.

Further, 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 a presence in India, the compliance verification mechanism become difficult.

It is under such circumstances, that the government has plans to come out with a simplified scheme of registration for such service providers located outside India.

 

GST Registration for OIDAR Services in India

The GST registration procedure for OIDAR services is a bit different from the normal GST registration. Since OIDAR registration happens through a tax representative because the nonresident has no fixed place of business in India. The following guidelines will help the person in getting the GST registration:

• The first thing is to find the tax representative who shall represent the non-resident in India.
   
• The GST registration shall be filed in the form GSTR 10. The form is very simple, however; there is no possibility to file the form online yet. The form needs to be filed with the Commissioner at the Bangalore office.
   
• Few documents of the foreigner shall be required like registration certificate in case of any registered entity, ID proof of directors etc.
   
• The ID proof of the tax representative shall also be required.

 

How would OIDAR services be taxable under GST?

For any supply to be taxable under GST, the place of supply in respect of the subject supply should be in India. If the place of supply is outside India, then GST shall not be applicable. The place of supply provisions is governed by Integrated GST act. The place of supply in case of OIDAR services are as follows:

• If both supplier and the recipient are in India, then the place of supply would be the location of the recipient of service. This is governed by the default rule since there is no specific rule over this and the nonresident shall be required to take the GST registration in India
   

• If the supplier is located outside India and the recipient is located in India, then the place of supply would be in India and shall be chargeable to tax in India and in this case as well, the GST registration shall be mandatory.

 

Who will be responsible for paying the tax?

In crux, there will be two situations that will emerge for OIDAR services under GST which are as follows:

• Under Reverse charge
• Without reverse charge – Special provision

If OIDAR services are received by the registered taxable person in India, then the same shall be treated as a reverse charge supply and the tax shall be paid accordingly. However, if the same is received by the nontaxable online resident then the same shall be governed by special provisions. However, before going forward with special provisions, we must understand the meaning of Nontaxable online resident.

The Nontaxable Online Resident is defined under IGST act as follows:

“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.

 

Special provisions for OIDAR Services under GST

From the place of provision rules, we know that if the OIDAR service provider supplies any service from outside India to a nontaxable online recipient, then the place of supply shall be in India and the transaction shall be taxable in India.

However, the biggest problem in this regard is that the supplier is sitting outside India and the government cannot compel the individual to collect from the resident individuals. Hence, in that case, the nonresident shall become liable to pay tax under GST and it becomes mandatory for him to register.

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 who has been the designated for grant registration in such cases.

There are two ways by which the nonresident can take registration to pay tax under GST which as follows:

• 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.

 

Special case of intermediary in OIDAR services under GST

If an intermediary located outside India arranges or facilitates the supply of such service to a non-taxable online recipient in India, the intermediary would be treated as the supplier of the said service. However, the intermediary shall not be treated as a supplier if the following conditions are satisfied:

• 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 non-taxable territory
   

• The intermediary involved in the supply does not authorize 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.
   

• The intermediary involved in the supply does not authorize delivery.
   

• The general terms and conditions of the supply are not set by the intermediary involved in the supply but by the supplier of services.

 

Some examples of what is OIDAR service and what is not

Service	Whether the provision of service is mediated by information technology over the internet or an electronic network?	Whether it is Automated and impossible to ensure in the absence of information technology	OIDAR Service
PDF document manually emailed by provider	Yes	No	NO
PDF document automatically emailed by provider’ s system	Yes	Yes	Yes
PDF document automatically downloaded from site	Yes	Yes	Yes
Stock photographs available for automatic download	Yes	Yes	Yes
Online course consisting of pre-recorded videos and downloadable PDFs plus support from a live tutor	Yes	No	No

 

Few more examples of OIDAR Services from CBEC guide

1. Website supply, web-hosting, distance maintenance of programmers and equipment

• Website hosting and webpage hosting
   
• Automated, online and distance maintenance of programmes
   
• Remote systems administration

2. Supply of images, text, and information and making available of databases

• Accessing or downloading desktop themes
   
• Accessing or downloading photographic or pictorial images or screensavers
   
• Subscription to online newspapers and journals
   
• Weblogs and website statistics

 

Conclusion

The concept of OIDAR services is very new under GST and it is natural that it will take some time to settle down. Further, it is good that these provisions came through under GST to provide level playing field to the domestic business in India.

Know more about:

• GST Registration in India
• GST Return filing