World is getting smaller with the use and access of internet and with that the nature of activities to a larger extent have transformed to online. In line with recent developments in technology the net of Service Tax has been expanded in order to cover online transactions within its leviability.

The scope of Online Information and Database Access or Retrieval (OIDAR) services has been widened vide amendment to Service Tax Rules, 1994 with effect from 01.12.2016, 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. The scope of OIDAR services also includes electronic services such as advertising on the internet, providing cloud services, provision of e-books, movie, music, software and other intangibles via telecommunication networks or internet. OIDAR services will also take into account providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network, online supplies of digital content like movies, television shows, music, etc., digital data storage and online gaming.

The rule to determine the place of provision of service has been amended, and the OIDAR services are omitted from Rule 9 of POPS Rules, 2012 and they are now governed as per Rule 3 of POPS. Accordingly, the place of provision of service will be location of the service receiver in case of OIDAR services with effect from 01.12.2016. However, if the location of the service receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service, except in case of OIDAR services.

If the OIDAR service provider is located in taxable territory such service provider will continue to be liable to pay service tax. With regard to expansion of scope of OIDAR services under Service Tax net, when service provided by person located in non-taxable territory to a non-assessee online recipient, the representative appointed by the service provider in taxable territory will pay tax and in case if no representative or no physical presence in taxable territory of the service provider, he himself or through an agent appointed by him for the purpose of paying Service Tax will bear the liability.

When OIDAR services are provided by any person located in a non-taxable territory to any person located in the taxable territory but other than non-assesse online recipient, liability will be on such person receiving services. If an intermediary located in the non-taxable territory including an electronic platform, a broker, an agent or any other person, by whatever name called, who arranges or facilitates provision of such service but does not provides the main service on his account shall be deemed to be receiving such services from the service provider located in non-taxable territory and providing such services to the non-assesse online recipient. Thereby the Government has stretched the scope of Service Tax to cover of OIDAR services to cover even the services received from a non-taxable territory.

Contributed by: Ruhi Jhota,