OIDAR services

What is the definition of OIDAR services?

Online information and database access or retrieval i.e OIDAR services  have been defined in Service Tax Rules, 1994, rule 2(1)(ccd) to mean 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,-

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

Who shall be liable to collect and discharge the service tax liability in cases of provision of cross border B2C OIDAR services?

Service providers providing OIDAR services to a non-assesse online recipient in taxable territory would be responsible for collection of service tax and remitting the same to the Government of India. However, the service provider in the non-taxable territory may appoint an agent in the taxable territory who will be person liable for paying service tax

Are all cross border B2C services provided in the taxable territory made taxable with effect from 1^stDecember, 2016?

No. Only cross border B2C OIDAR services provided in the taxable territory have been made taxable w.e.f 1^st December, 2016. Other cross border B2C services continue to be exempted. Further, cross-border B2B services have been taxable since prior to 1^st December, 2016, under reverse charge mechanism.

What is taxable territory?

• Taxable territory has been defined in section 65B of the Finance Act, 1994 as the territory to which the Finance Act, 1994 applies i.e. the whole of territory of India other than the State of Jammu and Kashmir.
• “India” includes not only the land mass but its territorial waters, continental shelf, exclusive economic zone or any other maritime zone as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976; the sea-bed and the subsoil underlying the territorial waters; the air space above its territory and territorial waters; and the installations structures and vessels located in the continental shelf of India and the exclusive economic zone of India, for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof.

Even though the cross border OIDARservices are being made leviable to service tax with effect from 1st December, 2016, will these services not get exempted by means of any existing exemption?

Vide notification No. 47/2016-ST, the existing exemption [Sl. No. 34(a) of notification No. 25/2012-ST] to services provided by a person located in a non- taxable territory and received by 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, will not be available for OIDAR servicesreceived by such persons w.e.f 1st December, 2016. OIDAR services have been assigned the same meaning as assigned to it in the clause (ccd) of sub-rule 1 of rule 2 of the Service Tax Rules, 1994 [inserted vide Notification no. 48/2016-ST].

Do OIDAR services include all services mediated by information technology over internet or electronic network?

Using the internet, or some electronic means of communication, just to communicate or facilitate outcome of service does not always mean that a business is providing OIDAR services.

What services would NOT be considered as OIDAR services?

Indicative list of non-OIDAR services

1. Supplies of goods, where the order and processing is done electronically
2. Supplies of physical books, newsletters, newspapers or journals
3. Services of lawyers and financial consultants who advise clients through email
4. Booking services or tickets to entertainment events, hotel accommodation or car hire
5. Educational or professional courses, where the content is delivered by a teacher over the internet or an electronic network (in other words, using a remote link)
6. Offline physical repair services of computer equipment
7. Advertising services in newspapers, on posters and on television

What type of services will be covered under OIDAR services?

OIDAR services covers services which are automatically delivered over the internet, or an electronic network, where there is minimal or no human intervention. In practice, this can be either:

1. where the provision of the digital content is entirely automatic eg, a consumer clicks the ‘Buy Now’ button on a website and either:

• the content downloads onto the consumer’s device, or

• the consumer receives an automated e-mail containing the content

2. where the provision of the digital content is essentially automatic, and the small amount of manual process involved doesn’t change the nature of the supply from an OIDAR service

All ‘electronic services’ that are provided in the ways outlined above are OIDAR services.

Read Complete FAQ on Withdrawal of Service tax exemption on cross border B2C OIDAR services