GST on OIDAR services!

The rapid proliferation of online services has transformed the global economy, prompting governments worldwide to adapt their taxation frameworks to this digital shift. India, recognizing the burgeoning digital marketplace, has integrated online services into its Goods and Services Tax (GST) regime to ensure equitable taxation and bolster revenue. This comprehensive guide delves into the intricacies of GST as it pertains to online services in India, elucidating its applicability, compliance requirements, and broader implications for both domestic and international service providers.

Let’s understand GST applicability on such services in detail!

What is meant by OIDAR?

Under the GST framework in India, OIDAR services refer to services delivered through the Internet or an electronic network with minimal human intervention. These are typically services provided online and consumed electronically.

As per sub-section (17) of section 2 of the IGST Act “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 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, movies, music, software, and other intangibles through telecommunication networks or the  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)

(vi) Digital data storage

(vii) Online gaming, excluding online money gaming as defined in clause (80B) of section 2 of the Central Goods and Services Tax Act, 2017 (12 of 2017)

Is GST applicable to online services?

Yes. GST is applicable to online services provided in India. To determine whether the service is provided in India, one has to understand Place of supply provisions relating to the same.

The provisions about GST applicability of OIDAR services can be read as follows:

‍

Update dated 31^st December 2024: Clarification on the place of supply of Online Services supplied by the suppliers of services to unregistered recipients

As per Section 12(2) of the IGST Act, 2017, the place of supply for services provided to unregistered persons shall be the location of the recipient, where the address on record exists. Section 31(2) of the CGST Act along with Rule 46(f) of the CGST Rules mandates that the recipient's State must be mentioned on tax invoices for online services, including OIDAR, online gaming, and services provided via e-commerce operators. Non-compliance by suppliers has resulted in misallocation of GST revenues among States. The GST Council clarified that this requirement is mandatory, irrespective of the value of supply, and the mentioned State will be treated as the "address on record." Any failure to comply may result in penalties under Section 122(3)(e) of the CGST Act.

Conclusion

In conclusion, the GST framework for online services provided through e-commerce operators underscores India’s commitment to regulating the digital economy and ensuring proper tax collection across States. With the increasing consumption of online services such as OIDAR, cloud services, and digital content, adherence to GST rules has become critical for both domestic and international suppliers. The recent clarification regarding mandatory invoicing details, especially capturing the recipient’s State for unregistered persons, further strengthens GST compliance and helps correct revenue distribution. Service providers must proactively align their invoicing practices and place of supply determinations with these legal requirements to avoid penalties and ensure smooth operations within India’s GST ecosystem.

‍