Withdrawal of exemption from service tax on cross border B2C OIDAR services provided online/electronically from a non-taxable territory to consumers in taxable territory in India
1. At present services received in taxable territory in India from outside the taxable territory by Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession are exempted [cross border B2C (business to consumer) services provided in taxable territory]. On the other hand, services received by other persons in taxable territory from non-taxable territory [cross border B2B (business to business) services] are taxable under reverse charge i.e. service recipient in taxable territory pays tax. Further, in view of Place of Provision of Service Rules, 2012 rule 9(b), with respect to online information and database access or retrieval services [OIDAR], the place of supply is location of service provider and thus such cross border B2B/B2C services provided by a person in non-taxable territory and received by a person in taxable territory are outside the levy of service tax.
2. In this context, kind attention is invited to notification No. 46/2016-ST, 47/2016-ST, 48/2016-ST and 49/2016-ST all dated 9th November, 2016. These notifications shall come into force 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. In this regard, there may be many questions in the mind of service providers in the non-taxable territory, recipients in the taxable territory and other stakeholders, in respect of various aspects pertaining to the taxation of such services. Accordingly, the following clarifications are issued:-
The detailed clarifications are available at the link:
3. All concerned are requested to acknowledge the receipt of this circular. Efforts should be made to identify service providers located in non-taxable territory providing cross border B2C OIDAR services in taxable territory by taking help of advertisements of such service providers appearing in newspapers, internet websites, social networking platforms etc.. Details of such service providers located in non-taxable territory should be intimated to Principal Commissioner, LTU-Bengaluru and such service providers should be contacted through email and informed about the service tax liability and compliance mechanism.
4. Difficulty if any, in the implementation of the circular should be brought to the notice of the Board. Hindi version would follow.
Source: Circular No. 202/12/2016-Service Tax F.No. 354/149/2016-TRU Government of India Ministry of Finance Department of Revenue (Tax Research Unit) Dated the 9th November, 2016