Introduction

In today’s digital era, the provision of services across borders through online platforms has grown exponentially. Recognizing the unique nature of such services, the Indian GST Law has carved out a special provisions for taxation of Online Information and Database Access or Retrieval Services (‘OIDAR Services’).

Entities located outside India providing OIDAR services in India must ensure strict compliance with GST regulations, failure of which can attract penalties, interest, and other legal consequences.

This blog post explains what OIDAR services are, their treatment under India's Goods and Services Tax (GST) regime, and compliance essentials  that every provider must know

Understanding OIDAR Services

OIDAR services mean services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply impossible to ensure in the absence of information technology and includes electronic services such as,-

1. advertising on the internet;
2. providing cloud services;
3. provision of e-books, movie, music, software and other intangibles through telecommunication
4. networks or internet;
5. providing data or information, retrievable or otherwise, to any person in electronic form through a computer network;
6. online supplies of digital content (movies, television shows, music and the like);
7. digital data storage; and
8. online gaming, excluding the online money gaming

GST Applicability on OIDAR Services

Where OIDAR services are provided by a person located outside India to a non-taxable online recipient (i.e., any unregistered person receiving online information and database access or retrieval services located in India), the foreign service provider must register and pay IGST.

Key Points:

• Rate of GST: IGST is levied at 18% on the supply of OIDAR services.
• Threshold Limit: No threshold exemption applies to foreign OIDAR service providers registration is mandatory irrespective of turnover. Registration required even for a single transaction; no minimum turnover exemption.
• Nature of Recipient: If the recipient is an unregistered person in India, GST liability falls on the foreign service provider.
• Service providers must obtain a unique GSTIN by applying via the GST Portal in FORM GST REG-10.
• Authorised Representative is required to be appointed in India

Who is a Non-Taxable Online Recipient?

As per Section 2(16) of the IGST Act, it refers to any means any unregistered person receiving online information and database access or retrieval services located in India

GST Registration Requirements

As per Section 24(ix) of the CGST Act, 2017, any person supplying OIDAR services from outside India to unregistered persons in India must mandatorily obtain GST registration, irrespective of threshold limit.

Form for Registration: FORM GST REG-10

Timeframe: Before commencement of business / operations in India.

Appointment of Representative

Under Section 14 of the IGST Act, if the non-resident OIDAR supplier has no physical presence in India, they must appoint a representative in India to handle compliance obligations.

Exceptions for being a supplier

If an intermediary (also abroad) facilitates the supply, the intermediary is treated as the supplier unless it:

• Identifies the original supplier and service clearly on the invoice;
• Does not handle or collect payment;
• Does not control service delivery;
• Does not set general terms—only the supplier does.

Typical examples of intermediary are Google Play Store and Apple

Return Filing Requirements

Form GSTR-5A:  Applicable to OIDAR service providers located outside India, supplying services to non-taxable online recipients in India.

The Service provider has to file GSTR-5A on a monthly basis by the 20th of the succeeding month online through GST Portal. Payment of IGST liability can be done using debit/credit cards, NEFT, RTGS, or any other online banking channel as permitted.

Note: No Input Tax Credit (ITC) is available to foreign OIDAR suppliers.

Record Keeping Requirements

As per Rule 56 of the CGST Rules, 2017, foreign OIDAR service providers must maintain the following documents :

- Invoices and transaction details.

- Details of taxes collected and paid.

- Customer location verification (for B2C supplies).

- Documents related to appointment of Indian representative (if applicable).

Consequences of Non-Compliance

Non-compliance may attract penalty

• Minimum of ₹20,000
• Amount of tax evaded, whichever is higher.

Interest will be applicable on delay in discharging tax liability

Challenges in GST Compliance for OIDAR Services

• Understanding classification and place of supply rules.
• Managing compliance from overseas
• Handling tax notices and litigation.
• Timely filing of monthly returns to avoid penalties

Conclusion

OIDAR services form a vital aspect of the cross-border digital economy. The Indian GST law, has laid out a comprehensive compliance framework for taxing such services. It is critical for overseas service providers to ensure compliance with registration, return filing, tax payment, and record keeping obligations, or appoint a representative in India to do so. Failing to comply can result in significant penalties, while compliance ensures seamless service delivery and legal credibility in the Indian market.

Frequently Asked Questions (FAQs)

Q1. Is registration under GST mandatory for all foreign service providers offering OIDAR services to India?

Ans: Yes, under Section 14 of the IGST Act, registration is mandatory without any threshold exemption.

Q2. How can a foreign OIDAR service provider obtain GST registration in India?

Ans: Through filing Form GST REG-10 online on the GST Portal. Our firm can assist in completing end-to-end registration formalities.

Q3. What are the filing requirements for a foreign OIDAR service provider?

Ans: The service provider must file GSTR-5A monthly by the 20th of the next month.

Q4. Can a foreign company appoint an agent in India for GST compliance?

Ans: Yes, foreign entities may appoint an authorized representative in India as per Rule 64 of the CGST Rules, 2017.

Q5. What happens if OIDAR service providers fail to register or comply with GST?

Ans: They may be subject to penalties under Section 122 and the recovery provisions under Section 79 of the CGST Act.