2020 (6) TMI 182 - AAR - GST

Classification of services - Online Information and Database Retrieval Services or not - self-administered test taken by the candidates - taxability - levy of IGST - CBEC Circular No. 202/ 12/2016-Service Tax dated 09.11.2016 - HELD THAT - Sl No. 10 of Notification No. 09/2017-IGST (R) dated 28.06.2017 exempts Services ( not including OIDAR services) received from a provider of service located in a non- taxable territory by the Central Government, State Government, Union territory, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession. Sl. No. 1 of Notification No. 10/2017-IGST (R) dated 28.06.2017 provides for payment of tax on any recipient when service is being supplied by any person who is located in a non taxable territory and is engaged in providing any service to any person other than non taxable online recipient. Serial No.1 of Notification No. 10/2017 - IGST (Rate) dated 28-06-2017 is only shifting the liability to pay tax from the hands of the supplier to the recipient. It does not create any liability. We have to first see whether there is any liability and if there is a liability to pay tax on a particular transaction then the liability to pay tax on that transaction would shift from the usual supplier to the exceptional recipient as per Notification No. 10/2017-IGST (Rate) dated 28-06-2017. If the transaction itself is exempt, there is no liability on the recipient of service. Since Type 3 is not an OIDAR service, there wont be any special liability on the supplier located outside India and hence the entire transaction is exempted both in the hands of the supplier and also the recipient by virtue of Sl No. 10 of Notification No. 09/2017-IGST (R) dated 28.06.2017. Self-administered test taken by the candidates - the candidate is required to go to the test center, where an administrator will verify the identity of the candidate, validate test registration and appointment of the candidate - Whether the service provided for type 2 test (the specified service) classifies as Online Information and Database Retrieval Services ? - HELD THAT - The service provided for type 2 test classifies as OIDAR Services. Levy of IGST - type 2 test provided by the applicant does not qualify as Online Information and Database Retrieval Services - supply of said services to non-taxable online recipients in India - HELD THAT - Nil in view of (a) above. Type 3 test - these tests contain a mixture of multiple choice questions and analytical writing assessment section i.e. essay-based questions - whether the service provided for type 3 test (the specified service) classifies as Online Information and Database Retrieval Services ? - HELD THAT - Service provided for type 3 test does not classify as OIDAR Services. If the type 3 test provided by the applicant does not qualify as Online Information and Database Retrieval Services , whether the applicant is liable to pay integrated tax on the supply of said services to non-taxable online recipients in India? - HELD THAT - IGST is exempted by virtue of Sl. No. 10 of Notification No. 09/2017-IGST (Rate) dated 28.06.2017.

Summary

Issues Involved:
1. Classification of Type 2 test services as 'Online Information and Database Retrieval Services' (OIDAR).
2. Tax liability on Type 2 test services if not classified as OIDAR.
3. Classification of Type 3 test services as OIDAR.
4. Tax liability on Type 3 test services if not classified as OIDAR.

Detailed Analysis:

Issue 1: Classification of Type 2 Test Services as OIDAR
The applicant provides various test administration solutions, including Type 2 tests where candidates must appear at test centers for invigilation. The applicant argued that Type 2 tests do not qualify as OIDAR services because they involve more than minimal human intervention, such as identity verification and monitoring by invigilators. The applicant relied on guidelines from the VAT Committee of the European Commission and a CBEC Circular to support their argument. However, the authority found that the human intervention in Type 2 tests is focused on the whole environment rather than individual needs, making it minimal. Thus, Type 2 tests are classified as OIDAR services under Section 2(17) of the IGST Act, 2017.

Issue 2: Tax Liability on Type 2 Test Services
Since Type 2 tests are classified as OIDAR services, the applicant is liable to pay integrated tax on these services supplied to non-taxable online recipients in India. The ruling confirms that the applicant must discharge IGST on these services.

Issue 3: Classification of Type 3 Test Services as OIDAR
Type 3 tests involve a mixture of multiple-choice and essay-based questions, with the latter being evaluated by human evaluators in the USA. The applicant argued that this human evaluation constitutes more than minimal human intervention, thus excluding Type 3 tests from being classified as OIDAR services. The authority agreed with the applicant, noting that the final scoring of essay-based questions involves significant human intervention, which disqualifies Type 3 tests from being classified as OIDAR services.

Issue 4: Tax Liability on Type 3 Test Services
Since Type 3 tests are not classified as OIDAR services, the authority examined the tax implications under Notification No. 09/2017-IGST (Rate) dated 28.06.2017. The ruling noted that services (excluding OIDAR) provided by a non-taxable territory supplier to an individual for non-commercial purposes are exempt from IGST. Thus, the supply of Type 3 test services to non-taxable online recipients in India is exempt from IGST.

Ruling:
a. The service provided for Type 2 tests classifies as OIDAR services.
b. The applicant is liable to pay integrated tax on Type 2 test services.
c. The service provided for Type 3 tests does not classify as OIDAR services.
d. IGST on Type 3 test services is exempt by virtue of Sl. No. 10 of Notification No. 09/2017-IGST (Rate) dated 28.06.2017.