Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Monday, November 14, 2016

Withdrawl of Service Tax Exemption on Cross Border B2C Online Information & database access or retrieval services (OIDAR Services) w.e.f. December 1, 2016.

Currently, Online/ electronic B2C service Providers located outside the taxable territory providing such services in taxable territory to  Govt. , Local Auth., Govt. Auth., or an Individual in relation to any purpose other than commerce, industry or any other business or profession are exempted.
I. EXEMPTION WITHDRAWN - Cross Border Online/ Electronic B2C Services Shall Be Taxable w.e.f. December 1, 2016.
With the objective of enhancing, the competitiveness of Indian Service Providers providing taxable B2C Services (OIDAR Services) including electronic/online services in India, the earlier exemption to Foreign Service providers vide "Entry No. 34(a) of the Mega Exemption Notification" located in foreign territory & providing such services in India has been withdrawn w.e.f. 1st December 2016 as per the following notifications.
As per Notification No. 46/2016-ST, 47/2016-ST, 48/2016-ST, 49/2016-ST, all dated 9th November 2016, Service Tax shall be charged on:
i. B2C Services provided by any person located in non taxable territory, &
ii. Received by Government, Local Authority, Governmental Authority or an Individual for any purpose   other than Commerce, Industry or any other Business & Profession w.e.f. December 1st, 2016.
II. Amendments in Point Of Provision Rules, 2012:
   i. Earlier Provisions: As per POP Rules 2012, for OIDAR Services, the place of supply of such         services shall be the location of service provider, if Location of service receiver is not available in            ordinary course of business.
   Thus, as per current provisions, B2C services provided by a Foreign Service provider in India        shall be deemed to be provided at the place at which Service Provider is located.         Therefore, these services were outside the purview of Service Tax.
   ii. Amended Provisions:   Now, the POP Rules, 2012 has been amended vice notification no.       46/2016-ST to provide that " in case of services other than "Online Information & Database        Access or Retrieval / B2B Services" , where the location of service receiver is not available in   ordinary course of business, the place of provision shall be the location of provider of service,              thereby bringing the Online B2C services under the purview of Service Tax.  
III. Service Provider Liable to Pay Service Tax: As per Notification No. 48/2016-ST dated November 9, 2016, Service provider located in non-taxable territory providing online/electronically B2C services to "non assessee online recipient", only such service provider shall be liable to pay Service Tax under Reverse Charge Mechanism in the following cases:
   Case I: Intermediary Liable to Pay Service Tax - Where the service provider located in        Foreign Territory provides services through an Intermediary, then such intermediary shall be           deemed to be receiving such services from such Foreign Service Provider & providing such         services to " Non Assessee Online Recipient", then such Intermediary shall be shall be deemed           to be the person liable to pay Service Tax.
   Case II: Authorized Representative - Where the Foreign Service Provider is represented in                India by any person for any purpose, then such person shall be liable to pay service Tax.    
   Case III: Appointment of Authorized Representative - If a service provider in non-taxable    territory does not have any physical presence or does not have a representative in Taxable                 territory, then the Service Provider may appoint a person in taxable territory for the purpose                of Paying Service Tax & such person shall be liable for paying Service Tax.  
   Meaning of Non-Assessee Online Recipient: A recipient of OIDAR Services shall be deemed to                 be  a non-assessee online recipient if such person does not have Service Tax Registration    under Service Tax Rules.              
IV. Forms For Registration under Service Tax for Persons Liable to Pay Service Tax in case of OIDAR Services:
   i.   FORM ST-1A: Application for registration under Service Tax.
   ii.  FORM ST-2A: Certificate of registration under Section 69 of Finance Act.
   iii. FORM ST-3C: Return u/s 70 of Finance Act, read with Rule 7 of Service Tax Rules,
    W.r.t. OIDAR Services provided or agreed to be provided by a person located in non-taxable     territory to a person located in taxable territory.
Further, a new Proviso has been inserted in rule 4A (1) of Service Tax Rules prescribing invoicing details for Foreign Service Providers.
V. Amendment in Reverse Charge Notification: The reverse Charge Notification has been amended vide Notification No. 49/2016-ST dated November 9, 2016 prescribing the Service Tax Payment & Procedure thereunder on the service provider located in Non-Taxable Territory with respect to OIDAR Services provided or agreed to be provided in taxable territory to " Non-Assessee Online Recipient w.e.f. December 1, 2016"
VI. Meaning of Online Information & Database Access or Retrieval Services:
OIDAR/ B2C Services means those services whose delivery is mediated over:
   i) Internet or Electronic Network, which renders them essentially automated with minimum human   intervention
   &  whose supply is impossible in the absence of Information Technology.
OIDAR/ B2C services includes the following:
   i) Advertising on the internet.
   ii) Cloud Services/ Digital Data Storage.
   iii) E-Books, E-Movies, E-Music, softwares

   iv) Online gaming.

Compiled by Tanveer Alam

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