Foreign companies offering online services like advertising, cloud services, music, and information to non-GST-registered individuals in India will be required to pay goods and services tax (GST) from October 1,2023. The Finance Act, 2023, amended the Integrated GST Act, broadening the definition of “non-taxable online recipient” to encompass unregistered individuals receiving Online Information and Database Access or Retrieval Services (OIDAR) in India. This change abolishes the previous exemption where OIDAR services received by central government, state government, government authorities, or individuals for non-business purposes were exempt.
The Central Board of Indirect Taxes and Customs has notified these changes, effective from October 1, 2023. Foreign OIDAR service providers, such as Facebook Inc, Twitter Inc, Google, and others, who have a substantial user base in India, will be subject to IGST on sales to unregistered individuals. This necessitates comprehensive record-keeping practices.
Experts have raised concerns regarding the impact of these changes, especially for companies like Netflix, Inc, which have a significant presence in India. The amendment makes OIDAR services taxable for foreign providers when offered to unregistered individuals in India, with an 18% GST levy.
Ankur Gupta, Practice Leader – Indirect Tax at SW India, highlighted potential implications on online education providers. While live streaming of events and classes might remain exempt, providing access to libraries or recorded videos will now be subject to GST.
In its 50th meeting on July 11, the GST Council decided to amend Rule 64 and FORM GSTR-5A of CGST Rules, 2017, enabling OIDAR service providers to report supplies made to registered persons in India in FORM GSTR-5A. This change aims to track due tax payments on a reverse charge basis by registered persons in India for supplies received from OIDAR service providers.