Introduction

With the introduction of Goods and Service Tax, the indirect tax regime of the country was overhauled. The Constitution defined “Goods and Services Tax” as “Goods and Services Tax means the tax on supply of goods, services or both.”  Under the previous tax regime, the levy was on different types of taxable events such as, manufacture, sale, rendering of service, purchase, entry into a territory of State etc. However, with the introduction of GST, this was changed and instead of multiple taxable events, tax was levied on a single event, termed as ‘supply’.

Supply under GST

Multiple business events, which were taxed separately in the form of Excise Tax, VAT, Service Tax etc. are now clubbed into one event, i.e., ‘supply’. The term denotes multiple activities such as, license, transfer, exchange, barter, sale, lease disposal and rental. Either of these events or activities conducted for the purpose of monetary / business consideration are now considered as “supply” under the purview of the GST regime.

Taxability of OIDAR services under GST

Taxability of OIDAR services under GST relates to taxing of a supply of service category which relates to provision of services or supply of goods by using internet as a medium and is intended for an online recipient situated in India.

Taxable Territory under GST relates to the geographic territory of India where taxable supply event takes place.  Thus, in other words, the taxable supply event must occur in India to attract GST. However, in case of OIDAR services, the taxable event is facilitated through the medium of internet and only the intended recipient is located in India while the supplier remains overseas. So, to include OIDAR services under GST, the law makes the provision of deemed place of supply.

Thus, as an exemption to the rule of taxable territory, in cases where supplier of OIDAR services is situated outside India, and the recipient of the services is situated in India, then the law deems the place of taxable OIDAR service as India. Thus, in order for OIDAR services to be taxable in India, in case where the recipient is a business entity the law stipulates that the recipient pay the GST as per the reverse charge mechanism.

However, in case of individual consumer, the provides a different mechanism. OIDAR services in GST law, in case of individual consumer recipient, the OIDAR supplier is required to obtain:

• GST Registration with the Principal Commissioner of Central Tax, Bengaluru or;
• Appoint a OIDAR representative in India, who would get registered and on behalf of the overseas OIDAR supplier pay the applicable GST.

Thus, Taxability of OIDAR services in GST emerges from the understanding that overseas OIDAR services supplier reap an unfair advantage by not being physically located in the territory of India, and continuing business by way of Internet.  The law in the interest of revenue cures this defect by providing special provisions in relation to registration and/or representation of such OIDAR supplier and deeming the taxable territory to be India.