GST ON OIDAR SERVICES BY FOREIGN FIRMS TO INDIVIDUALS & GOVT FROM OCT 1, 2023

GST chargeable on OIDAR services by foreign firms to individuals & Govt irrespective of any usage w.e.f. October 1, 2023

Background:

The GST Council in its 50th meeting held on July 11, 2023 had decided to amend Rule 64 and FORM GSTR-5A of CGST Rules, 2017 so that OIDAR service providers can provide the details of supplies made to registered persons in India in the return under FORM GSTR-5A. The intention behind this amendment is to keep track of due payment of tax on a reverse charge basis by such registered persons in India in respect of supplies received from Online Information and Database Access or Retrieval (OIDAR) service providers.

Until now, services provided by OIDAR providers located abroad in non-taxable territories were exempt from taxation when received by the central government, state government, government authorities, or individuals for non-business purposes. However, this exemption has been eliminated, effective from October 1, 2023.

This change is in response to the Finance Act of 2023, which amended the Integrated Goods Services Tax Act, 2017 (“the IGST Act”) to expand the definition of “non-taxable online recipient.” As per the revised definition, a non-taxable online recipient now includes any unregistered individual or entity receiving OIDAR services within India’s taxable territory, regardless of the purpose for which they are received.

The CBIC vide Notification No. 28/2023-Central Tax dated July 31, 2023 made certain changes in the Finance Act which will be effective from October 1, 2023.

Page Contents

*Changes in OIDAR services from the Finance Act, 2023

*Amendments in the IGST Act through IGST (Amendment) Act, 2023

*Effective changes in the form and manner of submission of returns by OIDAR services

*Exemption on supply of services provided by OIDAR service provider in a non-taxable territory

Changes in OIDAR services from the Finance Act, 2023

* Section 160 of the FA, 2023 – Section 2(16) of the IGST Act:

“(16) “non-taxable online recipient” means any unregistered person receiving online information and database access or retrieval services located in taxable territory.”

The definition of “non-taxable online recipient” aims to broaden the scope of OIDAR. Any unregistered individual in India’s taxable territory, regardless of the purpose, who receives OIDAR services will be considered a non-taxable online recipient. Previously, services from OIDAR providers located in non-taxable territories abroad, when received by the central government, state government, government authorities, or individuals for non-business purposes, were exempt from taxation. However, this exemption has been eliminated from October 01, 2023.

The Government vide Notification No. 02/2023 – Integrated Tax dated September 29, 2023, seeks to notify the provisions of Integrated Goods and Services Tax (Amendment) Act, 2023 dated August 18, 2023 amended the IGST Act to levy GST on services provided by OIDAR Service provider with effect from October 01, 2023.

Amendments in the IGST Act through IGST (Amendment) Act, 2023

Current Provision                                      Amended Provision                                                                Effect                                                               Notified

Section 2 of the IGST Act

Definitions