Dear All,

This is in furtherance to the Tax Focus circulated vide the appended mail pertaining to the Advance Ruling issued by the Authority for Advance Ruling, Karnataka (“the AAR”) in the case of NCS Pearson Inc. (“the Company”). The AAR ruled that services pertaining to Type-3 test does not fall within the ambit of Online Information and Database Access or Retrieval Services (“OIDAR”) and hence not subject to GST (neither in the hands of the supplier (i.e., the Company) nor the recipient).

Aggrieved by the ruling passed by the AAR, the Principal Commissioner of Central Tax, Bangalore (“the Department”) has filed an appeal before the Appellate Authority of Advance Ruling, Karnataka (“the AAAR”).

The AAAR has set aside the AAR ruling and allowed the Departmental Appeal on the following key aspects:

• Process of Type-3 test registration, conduct of the test and communication of the results are all managed electronically over internet through software provided by the Company. This means that such a test cannot be conducted in the absence of information technology;
• Performance of the candidate is also assessed through automated system and the reliability of the automated system is validated by the near agreement to the score given by the human scorer. For this reason, the involvement of the human element in the assessment of essay response is well within the realm of ‘minimal human intervention’;
• On whole, Type-3 computer-based test satisfies all the conditions to qualify as ‘OIDAR’ under Section 2(17) of the Integrated Goods and Services Tax Act, 2017.

Thus, the AAAR held that services pertaining to Type-3 test also qualify as OIDAR services and hence subject to levy of GST.

*Order No. KAR/AAAR/07/2020-21 dated 13 November 2020  (The Appellate Authority for Advance Ruling, Karnataka)