By CA Surekha S Ahuja
“In the digital economy, compliance is not a choice—every click creates a tax consequence.”
The GST framework treats Online Information and Database Access or Retrieval (OIDAR) services—automated, electronically supplied digital services delivered online with minimal human intervention—as a specialised class of cross-border supplies governed by distinct statutory provisions, liability mechanisms, registration requirements, documentation standards, and audit triggers.
With the rise of SaaS platforms, AI tools, online gaming, cloud-based software, e-learning subscriptions, OTT platforms, and digital repositories, OIDAR has become one of the most misinterpreted areas of indirect taxation.
One misclassification—whether a service is truly automated OIDAR or human-driven consultancy—can reverse the tax liability, deny ITC, force foreign suppliers to register in India, and trigger notices under Sections 73/74.
This Guidance Note is designed as a complete professional reference, covering classification logic, legal tests, RCM vs forward charge, compliance flow, documentation, NTOR checks, risk flags, and interplay with Income Tax (Section 195 & DTAA).
Statutory Framework & Meaning of OIDAR
Definition — Section 2(17), IGST Act
OIDAR refers to services that:
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are delivered over the internet or an electronic network,
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are essentially automated,
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require minimal human intervention, and
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cannot be provided without information technology.
Typical OIDAR Examples
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SaaS subscriptions
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AI-based automated tools
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Online gaming platforms
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Streaming/OTT services
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Digital databases, online libraries
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Cloud management tools
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Automated design, translation, analytics utilities
The “minimal human intervention” test is the core of all classification disputes.
OIDAR vs Human-Dependent Services — The Key Differentiator
A service is not OIDAR if meaningful human judgment, analysis, review, or expertise is essential.
Not OIDAR (Even if delivered online)
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Legal advisory
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Tax consultancy
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Branding, management consultancy
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Immigration advisory
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Live training by experts
These are treated as import of services, not OIDAR.
OIDAR requires both:
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automation, and
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electronic delivery.
Correct classification affects who pays GST, at what time, and under which provision.
GST Liability Mechanism — RCM vs Forward Charge
The liability depends entirely on the status of the recipient.
Liability Matrix
| Recipient Type | GST Mechanism | Who Pays? | Legal Basis |
|---|---|---|---|
| Registered business in India | RCM | Recipient | Sec 5(3), IGST + Notif. 10/2017 |
| Unregistered individual/consumer | Forward Charge | Foreign supplier | Sec 14, IGST + Sec 24 CGST |
| Government/PSU/Local Authority (post-Oct 2023) | Forward Charge | Foreign supplier | 47th GST Council |
| Unregistered importing non-OIDAR professional services for business | RCM (temporary registration) | Recipient | Sec 24(iii) CGST |
| Individuals taking services for personal use | No GST | None | No business nexus → RCM does not apply |
Liability Triggers Explained
Registered Businesses → RCM
Indian business recipient must pay IGST under RCM for all OIDAR imports.
Reason:
Section 5(3), IGST Act + Notification 10/2017.
Unregistered Individuals → Foreign Supplier Liable
Foreign suppliers must:
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take REG-10 registration,
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file GSTR-5A,
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pay 18% IGST.
Reason:
Section 14, IGST Act.
Government and Non-Business Entities
Post-October 2023, liability fully shifted to forward charge.
Unregistered Importing Human-Dependent Professional Services
Example: hiring foreign legal/tax experts.
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Not OIDAR
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Temporary registration required
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IGST under RCM
Personal-Use Advisory
Where service has no business nexus → no GST.
Foreign Supplier Registration (REG-10)
Mandatory — No Threshold
Every foreign OIDAR supplier must register, regardless of turnover.
Documents
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Passport
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Foreign bank details
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PAN of Indian authorised representative
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Authorisation letter
Timelines
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Approval in ~3 working days
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Validity: 90 days (extendable)
Returns
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GSTR-5 (monthly)
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GSTR-5A (quarterly)
Late fee applies automatically.
No ITC
Foreign suppliers cannot claim input tax credit.
Documentation & Invoicing Requirements
For Foreign Suppliers (Forward Charge)
Invoice must contain:
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SAC 9983
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IGST @18%
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Place of Supply (India)
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Mandatory NTOR evidence:
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IP address
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Payment instrument location
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Billing address
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Device country code
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For Indian Businesses Under RCM
Must issue:
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Self-invoice (Rule 46)
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Payment voucher
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RCM challan
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Service contract / subscription email
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Bank/SWIFT proof
Record Retention
72 months from the due date of annual return.
Input Tax Credit Eligibility
Registered Businesses
Full ITC available if service is used for business.
Mixed use → reversal under Rule 42/43.
Individuals / Non-Business
No ITC allowed.
Foreign Suppliers
ITC permanently blocked.
Pros and Cons of the OIDAR Framework
Pros
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Full ITC for businesses
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Clear liability mechanism
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Strong audit trail via NTOR
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Prevents revenue leakage
Cons
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Heavy compliance burden on small foreign suppliers
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Forward charge increases consumer cost
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Documentation is extensive
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Severe penalties for misclassification
Risk Flags & Audit Triggers
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Misclassification of human-dependent services as OIDAR
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Incorrect recipient verification (GSTIN, IP logs, billing data)
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Non-registration under REG-10
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Non-filing of GSTR-5/5A
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Incorrect SAC, PoS, or IGST rate
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ITC claimed on services not qualifying as OIDAR
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Missing NTOR documentation
Interplay With Income Tax Act — Section 195
TDS Applicability
TDS applies only if income is chargeable to tax in India.
DTAA Relief
Under treaties (e.g., India–UK), professional income taxable only if:
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fixed base in India,
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or stay ≥90 days,
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or Permanent Establishment arises.
OIDAR services, being automated, often do not fall under FTS under many DTAAs.
Compliance
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Form 15CB (if applicable)
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Form 15CA before remittance
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Maintain invoice + agreement trail
Disallowance possible under Section 40(a)(i).
Closing Statement
As India strengthens its digital tax environment, OIDAR classification and compliance have become foundational for every business consuming global technology platforms and every foreign supplier delivering digital services into India.
The distinction between automated OIDAR and human-dependent consultancy is the single most critical determinant of GST liability.
Accurate classification, meticulous documentation, NTOR verification, and timely registration and return filing are now essential for audit-proof compliance.
For Indian businesses, these rules protect ITC integrity and prevent litigation.
For foreign suppliers, they ensure lawful market access without penalty exposure.
In a world powered by digital ecosystems, GST liability flows wherever the service flows—and precision is the only defence.
