ONLINE INFORMATION AND DATABASE ACCESS OR RETRIEVAL SERVICES UNDER GST REGIME

[Mr. M. GOVINDARAJAN]

Finance Act, 1994

‘Online information and database access or retrieval services’ was introduced in the service tax net with effect from 16.07.2001 vide notification No.4/2001-ST, dated 09.07.2001. Section 65(75) of the Finance Act, 1994 defines the said service as any service provided or to be provided to any person, by any person, in relation to on-line information and database access or retrieval or both in electronic form through computer network, in any manner.

Indicate list of services

The following are the services are covered under ‘online information and database access or retrieval services’-

• Website supply, web-hosting, distance maintenance of programmes and equipment;

• Website hosting and webpage hosting;
• automated, online and distance maintenance of programmes;
• remote systems administration;
• online data warehousing where specific data is stored and retrieved electronically;
• online supply of on-demand disc space.

• Supply of software and updating thereof;

• Accessing or downloading software (including procurement/accountancy programmes and anti-virus software) plus updates;
• software to block banner adverts showing, otherwise known as Banner blockers;
• download drivers, such as software that interfaces computers with peripheral equipment (such as printers);
• online automated installation of filters on websites;
• online automated installation of firewalls.

• supply of images, text and information and making available of databases;

• Accessing or downloading desktop themes;
• accessing or downloading photographic or pictorial images or screensavers;
• the digitized content of books and other electronic publications;
• subscription to online newspapers and journals;
• weblogs and website statistics;
• online news, traffic information and weather reports;
• online information generated automatically by software from specific data input by the customer, such as legal and financial data, (in particular such data as continually updated stock market data, in real time);
• the provision of advertising space including banner ads on a website/web page;
• use of search engines and Internet directories.

• supply of music, films and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific and entertainment broadcasts and events;

• Accessing or downloading of music on to computers and mobile phones;
• accessing or downloading of jingles, excerpts, ringtones, or other sounds;
• accessing or downloading of films;
• downloading of games on to computers and mobile phones;
• accessing automated online games which are dependent on the Internet, or other similar electronic networks, where players are geographically remote from one another.

• supply of distance teaching.

• Automated distance teaching dependent on the Internet or similar electronic network to function and the supply of which requires limited or no human intervention, including virtual classrooms, except where the Internet or similar electronic network is used as a tool simply for communication between the teacher and student;
• workbooks completed by pupils online and marked automatically, without human intervention.

With effect from 1st December 2016, whereby service tax would be chargeable on online information and database access or retrieval [OIDAR] services provided by any person located in non-taxable territory and received by Government, local authority, governmental authority, or an individual in relation to any purpose other than commerce, industry or any other business or profession [cross border B2C (business to consumer) OIDAR services provided in taxable territory]. Online information and database access or retrieval [OIDAR] services have been re-defined in Service Tax Rules, 1994 to include electronic services.

Rule 2(1) (ccc) defines the expression ‘online information and database access or retrieval services’ as 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,-

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

GST regime

In GST regime ‘online information and database access or retrieval services’ is included.  Since it attracts integrated tax, the provisions relating to this services are found place in ‘Integrated Goods and Services Tax Act, 2017. The provisions relating to this service are discussed in this article.

Definition

Section 2(17) of the Integrated Goods and Services Tax Act, 2017 defines the expression ‘online information and database access of retrieval services’ as 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,–

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

The definition of this service in IGST Act is same as the definition in Service Tax Rules, 1994.

Place of supply

The place of supply decided the taxability of the taxable person.  The place of supply in respect of online information and database access of retrieval services is dealt with in section 13(12) of IGST Act

Section 13(12) provides that the place of supply of online information and database access or retrieval services shall be the location of the recipient of services.

The explanation to this section provides that for the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non-contradictory conditions are satisfied, namely:

• the location of address presented by the recipient of services through internet is in the taxable territory;
• the credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory;
• the billing address of the recipient of services is in the taxable territory;
• the internet protocol address of the device used by the recipient of services is in the taxable territory
• the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory;
• the country code of the subscriber identity module card used by the recipient of services is of taxable territory;
• the location of the fixed land line through which the service is received by the recipient is in the taxable territory.

Simplified registration scheme

Section 14(2) provides that the supplier of online information and database access or retrieval services referred to in sub-section (1) shall, for payment of integrated tax, take a single registration under the Simplified Registration Scheme to be notified by the Government.  The Government is to give notification in this regard.

Any person located in the taxable territory representing such supplier for any purpose in the taxable territory shall get registered and pay integrated tax on behalf of the supplier.

If such supplier does not have a physical presence or does not have a representative for any purpose in the taxable territory, he may appoint a person in the taxable territory for the purpose of paying integrated tax and such person shall be liable for payment of such tax.

Payment of tax

Section 14(1) provides that on supply of online information and database access or retrieval services by any person located in a non-taxable territory and received by a non-taxable online recipient, the supplier of services located in a non-taxable territory shall be the person liable for paying integrated tax on such supply of services.

in the case of supply of online information and database access or retrieval services by any person located in a non-taxable territory and received by a non- taxable online recipient, an intermediary located in the non-taxable territory, who arranges or facilitates the supply of such services, shall be deemed to be the recipient of such services from the supplier of services in non-taxable territory and supplying such services to the non-taxable online recipient except when such intermediary satisfies the following conditions, namely-

• the invoice or customer’s bill or receipt issued or made available by such intermediary taking part in the supply clearly identifies the service in question and its supplier in non-taxable territory;
• the intermediary involved in the supply does not authorize the charge to the customer or take part in its charge which is that the intermediary neither collects or processes payment in any manner nor is responsible for the payment between the non-taxable online recipient and the supplier of such services;
• the intermediary involved in the supply does not authorize delivery; and
• he general terms and conditions of the supply are not set by the intermediary involved in the supply but by the supplier of services.