With effect from 01.12.2016 cross border online information and database access or retrieval services provided by a foreign service provider to a person in India will become taxable irrespective of the fact it is for the purpose of business or otherwise.
The services received in India from outside India by was exempted vide Entry No. 34 of the Mega Exemption Notification. According to the said entry no. 34, services received by the Government, a Local Authority, a Governmental Authority or an individual in relation to any purpose other than commerce, industry or any other business or profession were exempted. This exemption is being curtailed and from 01.12.2016 the services provided by a person outside India and received by person in India in respect of online information and database access or retrieval (“OIDAR”) services, will not be available.
As per Rule 9(b) of the Place of Provision of Service Rules, 2012, for the online information and database access or retrieval (“OIDAR”) services, the place of supply is location of service provider and thus, such services provided by a person in non-taxable territory and received by a person in taxable territory are outside the levy of Service tax.
Now, the Government has issued Notification No.s 46/2016-ST, 47/2016-ST, 48/2016-ST and 49/2016-ST all dated 9th November, 2016; coming into force with effect from 1st December 2016, whereby service tax would be chargeable on online information and database access or retrieval [OIDAR] services provided by any person located in non- taxable territory and received by Government, local authority, governmental authority, or an individual in relation to any purpose other than commerce, industry or any other business or profession [cross border B2C (business to consumer) OIDAR services provided in taxable territory].
Online information and database access or retrieval [OIDAR] services have been re-defined in Service Tax Rules, 1994 to include electronic services. Accordingly “online information and database access or retrieval services” means 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 and involving minimal human intervention, and impossible to ensure in the absence of information technology and includes electronic services such as,- (i) advertising on the internet;(ii) providing cloud services; (iii) provision of e-books, movie, music, software and other intangibles via telecommunication networks or internet; (iv) providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network; (v) online supplies of digital content (movies, television shows, music, etc.); (vi) digital data storage; and (vii) online gaming.
Three new forms have also been inserted for this purpose. “FORM ST- 1A”: Application form for registration for person in non-taxable territory providing OIDAR services in India. “FORM ST- 2A”: Certificate of registration and “FORM-ST-3C”: Service Tax Return, with respect to OIDAR services provided or agreed to be provided by any person located in a non-taxable territory and received by any person located in the taxable territory.