Ambit of OIDAR Services – AAR Karnataka*
by ReinHeads Team | Jun 19, 2020
| Facts |
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- NCS Pearson Inc. (‘the Applicant’) is engaged in the provision of computer-based test administration solutions to its clients viz. educational institute, professional licensing organization, etc.
· The Applicant offers 3 types of test-administrative solutions (on behalf of its clients) to the test-takers who are typically unregistered individuals across world including India (‘the Candidates’), as under:
| Particulars |
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Type 1 |
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Type 2 |
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Type 3 |
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| Type of questions – Multiple Choice Questions (‘MCQ’) or Analytical Writing Assessment section i.e., essay-based questions (‘AWA’) |
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Only MCQ |
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Only MCQ |
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Mixture of both |
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| Tests are self-administered – Profile creation, selection of desired test, remitting of payment, and scheduling test appointment over Internet browser |
|
Yes |
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Yes |
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Yes |
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| Test taken at test centers in India which are physically administered, supervised, and monitored by an invigilator. Invigilator verifies the Candidate’s identity |
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No, can be taken from any location |
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Yes |
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Yes |
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| The Candidates can see final scores for MCQ provided by computer-based algorithm immediately upon completion of test |
|
Yes |
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Yes |
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Yes |
|
| The Candidates can see indicative (non-final) score for AWA provided by computer-based algorithm immediately upon completion of test. AWA are then sent to a human-evaluator in the USA for assessment and final scoring. In case difference of more than 1 point, AWA are again sent to an expert for re-evaluation |
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Not applicable |
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Not applicable |
|
Yes |
|
| Point of human intervention |
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None |
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At test Center |
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At test center and evaluation |
|
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- The Applicant contends that only Type 1 tests (which are entirely automated) are liable to GST since it falls under the category of Online Information and Database Access or Retrieval Services (‘OIDAR’) and the Candidates qualify as ‘non-taxable online recipients’ under Section 2(16) of the Integrated Goods and Services Tax Act 2017 (‘the IGST Act’)
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| Issues before the AAR |
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| · Whether the Type 2 and Type 3 test classifies as OIDAR service?
· If the Type 2 and Type 3 test does not qualify as OIDAR service, whether the Applicant is liable to pay IGST on the supply of said services? |
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| Discussion and Findings of the AAR |
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- Section 2(17) of the IGST Act defines OIDAR to mean services which are delivered over the internet/ electronic network, automated, involve minimal human intervention and whose delivery is impossible in absence of information technology
- Type 2 test
- The human activity on the side of supplier is focused on the whole environment, i.e., the whole test center and not on specific need of individual candidate
- Invigilator is not directly intervening where they can make a difference in the scores achieved by the Candidates
- Provision of taking tests online at designated test centers are naturally bundled activities, supplied in conjunction with each other in the ordinary course of business and therefore can be termed as Composite Supply as per Section 2 (30) of the CGST Act
- Main object of the whole activity is to take online tests, where the principal supply would be OIDAR service provided by the Applicant to the Candidates
- Type 2 tests fall under the category of OIDAR services
- Tests are scored after human intervention and therefore outside the purview of OIDAR
- Since test is not an OIDAR service, there would not be any special GST liability on the Applicant (located outside India) and entire transaction is exempted both in the hands of the supplier and also the recipient vide SI No. 10 of Notification No. 09/2017-IGST (R) dated 28th June 2017
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*Advance Ruling No. KAR ADRG 37/ 2020 dated 22 May 2020 (The Authority for Advance Ruling, Karnataka)
