Special provision for payment of tax by a supplier of online information and database access or retrieval services located outside India to specified person in the taxable territory.

Definition of online information and database access or retrieval services in GST.

These are the new type of entities the revised Model GST draft has tried to cater.Let us first start from the meaning of the term introduced in revised GST law. Section 2(21) of IGST Law defines the term as:

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

Registration before providing any such services from a place outside India to unregistered Indian user.

Schedule V of Model GST law provide for the registration requirement for the entities engaged in the supply of online information and database access or retrieval services from a place outside India. These companies will have to take registration in GST in India before supply of any services to an unregistered Indian user.

Supply of online information and database access or retrieval services from a place outside India to a registered user.

For the supply of online information and database access or retrieval services from a place outside India to a registered user will be covered in imports.The liability to pay GST on such transactions will be on importer.

How to determine the place of supply for online information and database access or retrieval services ?

Clause 12 of section 10 of IGST Law provide for the determination of place of supply for supply of this nature. Text of section is reproduced here:

“(12) (a) The place of supply of the “online information and database access or retrieval services” services shall be location of recipient of service.

(b) 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:-
(i) the location of address presented by the recipient of service via internet is in taxable territory;
(ii) 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 service settles payment has been issued in the taxable territory;
(iii) the billing address of recipient of service is in the taxable territory;
(iv) the internet protocol address of the device used by the recipient of service is in the taxable territory;
(v) the bank of recipient of service in which the account used for payment is maintained is in the taxable territory;
(vi) the country code of the subscriber identity module (SIM) card used by the recipient of service is of taxable territory;
(vii) the location of the fixed land line through which the service is received by the recipient is in taxable territory.”

Special provision for payment of tax by a supplier of online information and database access or retrieval services located outside India to specified person in the taxable territory

Section 12 of IGST Law provide for the special provisions for payment of tax by a supplier of online information and database access or retrieval services located outside India. 

• When a  supplier in non – taxable territory supplying the online information and database access or retrieval services to specified person in the taxable territory. The supplier in non-taxable territory will be liable to pay IGST on the supply.
• In case the supply of services by a person in non-taxable territory to a non registered person in taxable territory involving an intermediary.The location of that intermediary is also in non-taxable territory.Then that intermediary will be deemed to be receiving those services from supplier. It will also be deemed that intermediary provide that services to the recipient in India.
• If the intermediary fulfill the following conditions it will not be deemed to receive or supply such services.
  • 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 authorise the charge to the customer or take part in its charge i.e. intermediary neither collects or processes payment in any manner nor is responsible for the payment between the non-assesse online recipient and the supplier of such services;
  • the intermediary involved in the supply does not authorise delivery;
  • the general terms and conditions of the supply are not set by the intermediary involved in the supply but by the service provider.
• The supplier of online information and database access or retrieval services referred in sub-section (1) shall, for payment of IGST, take a single registration under a Simplified Registration Scheme as may be prescribed.
• Any person located in taxable territory representing such supplier for any purpose in the taxable territory shall take a registration and pay IGST 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 IGST and such person shall be liable for paying IGST

These are the important provisions inserted into the revised draft of Model GST and IGST law. There are numerous transaction from outside India which skip the taxation. These provisions have tried to bring all of them in ambit of taxation.

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