OIDAR GST Registration: A Detailed Guide for a Seamless Process
The tax system has had to change to keep up with the quickly changing digital services market. The taxation of Online Information Database Access and Retrieval (OIDAR) services under the Goods and Services Tax (GST) regime is a noteworthy component of this adoption. The goal of this article is to clarify the nuances of OIDAR services, including the tax ramifications and regulatory standards that companies operating in this field must follow.
Table of content
What is OIDAR service under GST?
OIDAR services entail minimum human involvement in service delivery via the Internet. The primary feature is that the service is provided online, avoiding any face-to-face contact between the service provider and the recipient. A step towards leveling the playing field for domestic service providers in terms of pricing is the inclusion of OIDAR services under GST.
OIDAR (Online Information and Database Access or Retrieval) services include the following examples:
Downloadable Applications and Software: Making software and applications available for internet or download access.
Cloud Services: Providing cloud computing-related services, such as data hosting, processing power, and storage.
Online gaming services: offering virtual worlds, multiplayer games, in-game purchases, and other platforms and services for online gaming.
Digital Content Distribution: Using online channels to distribute digital content, including music, videos, photos, and e-books.
Online Education and Training: Providing training classes, certification courses, and educational courses online.
Web Hosting and Maintenance: Offer web hosting services and oversee program and equipment maintenance from a distance.
Online Advertising Services: Providing online advertising space, such as sponsored content, banner adverts, and other digital marketing services.
Services for Electronic Data Interchange (EDI): Enabling businesses to exchange business documents electronically.
Search Engine Services: Providing indexing, search algorithms, and search result displays, among other search engine services.
Digital Data Storage Services: Offering cloud-based storage services as well as online storage options for digital data.
The government intends to tax any OIDAR services supplied for commercial or non-business reasons, whether they are rendered inside or outside of India, under the GST. This covers services offered by the government, nonprofit organisations, and other organisations. Online service providers are required to designate an agent to manage tax payments if they do not have an office in India. Furthermore, in accordance with Section 14 of the Integrated Goods and Services Tax (IGST) Act, the supplier in a non-taxable territory is required to pay the tax if a non-taxable online recipient obtains online services from that territory.
Who Needs to Register for OIDAR Services under GST
Regarding OIDAR registration under GST, all organisations offering OIDAR services in India are required to register under GST, regardless of their turnover. As a result, any OIDAR service providers—including those based outside of India—who offer their services to Indian citizens must register for GST. The intermediary who provides services on behalf of an OIDAR service provider who is situated in a non-taxable jurisdiction and the recipient is a non-taxable online recipient (NTOR) is required to register and pay GST. Likewise, in the event that the beneficiary is a taxable individual in India and the OIDAR service provider is situated in a non-taxable area, the provider is required to designate a representative in India to register and pay taxes on their behalf.
Steps of the OIDAR GST Registration Process
Step 1: Go to the GST Portal. Navigate to "Services" and then "Registration" from the top menu of the GST portal.
Step 2: Choose "New Registration” and then the "Taxpayer" type.
Step 3: Enter the basic information. Give your PAN, email address, mobile number, and legal name. Use the OTP to confirm.
Step 4: An Application Reference Number (ARN) will be sent to your email and mobile device after verification. To proceed with the registration process, click the "ARN" option. Once the ARN application has been successfully validated, you will be taken to an OTP page. Enter the OTPs for your phone and email. The system-generated 15-digit Temporary Reference Number (TRN) is shown.
Step 5: Choose the "PROCEED option". Alternatively, you can use the Temporary Reference Number (TRN) to log in by selecting the Temporary Reference Number (TRN) radio option under Services > Registration > New Registration. In the TRN field, type the generated number. Proceed after entering the captcha text. It displays the "Verify OTP" page. Enter the OTP that was issued to your email address and cell phone. The page "My Saved Application" is displayed. In the Action column, click the "Edit" icon.
Step 6: Provide proof of address, Aadhaar, and PAN, among other required documents.
Step 7: Following form submission, you will receive an acknowledgement. You will be informed when the application is approved when it has been processed.
During the registration procedure, extra information such as the Type of Service and Place of Supply (PoS) must be provided for OIDAR services. Before beginning the registration procedure, make sure you have all the required paperwork and data.
OIDAR GST Rate and HSN Code
Both OIDAR service providers based in India and those outside the country are subject to the 18% IGST levy on the sale of digital services. The online sale of e-books is an exemption, though. Under the GST Tariff, this service is categorised under HSN code 9984 (Telecommunications, Broadcasting, and Information Supply Services) and is eligible for a 5% reduction in rate.
Place of Supply for OIDAR Services
To determine which type of GST (CGST, SGST, or IGST) is applicable, it is essential to determine the place of supply for OIDAR (Online Information and Database Access or Retrieval) services under GST. The following regulations apply to the location of supply for OIDAR services:
Business-to-business (B2B) transactions: The place of supply for OIDAR services is the receiver's business premises if the beneficiary is a registered business entity. For instance, the place of supply is the location of an Indian company that is registered for GST and uses OIDAR services.
Business to Consumer (B2C) Transactions: The location of the recipient's typical place of residence serves as the place of supply for OIDAR services if the recipient is an individual or an unregistered business (B2C). When someone in India uses OIDAR services, for instance, the point of supply is where that person lives. Since it establishes the applicable GST, OIDAR service providers must accurately identify the place of supply. While the Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), or Union Territory Goods and Services Tax (UTGST) may be applicable depending on the recipient's location, the Integrated Goods and Services Tax (IGST) is applicable in business-to-business (B2B) transactions.
Date of Supply for OIDAR Services
When figuring out when the obligation to pay tax occurs, the date of supply for OIDAR (Online Information and Database Access or Retrieval) services under GST is useful. The GST law contains precise regulations that control the date of supply. The following are the main details of the OIDAR service supply date:
Business-to-business (B2B) transactions: The date of supply for OIDAR services rendered to a registered business (B2B) is the earlier of the following:
The date on which the invoice was issued.
The date of payment receipt by the supplier.
The day that comes right after sixty days from the invoice's issue date.
Business-to-consumer (B2C) transactions: The date of supply for OIDAR services rendered to an unregistered business (B2C) or an individual is the earlier of the following:
The date on which the invoice was issued.
The date of payment receipt by the supplier.
An invoice is not present: The date of supply is the day the recipient uses the service if an invoice is not sent out within the allotted time. Determining the tax liability and guaranteeing adherence to GST requirements seeks an understanding of the date of supply. It makes it clear when the recipient must pay GST on the OIDAR services received and when the supplier must account for the transaction.
Recent Updates
Significant changes have been made to the GST structure that oversees OIDAR services with the goal of improving compliance and expanding the tax base. By eliminating the phrases "minimal human intervention" and "essentially automated," a significant revision to the Finance Act 2023 has redefined OIDAR services. This modification suggests that more services, even those involving some degree of human interaction, may now be covered by OIDAR if they are provided via electronic networks or the internet.
OIDAR GST Compliance and Return Filing
Strict compliance and return filing standards must be followed by registered OIDAR service providers:
GSTR-5A Monthly Filing: By the 20th of the month after the month in which services were rendered, providers are required to submit a return. Information about all taxable services rendered and taxes received is included in this return.
Nil Returns: As with other types of GST compliance, a nil return must be submitted if there are no outgoing supplies within a given month.
As a result of Notification 51/2023 on 29.09.2023, Table 5B in GSTR 5A was recently added. It focuses on supplies that are made to registered beneficiaries (B2B). In these situations, thorough reporting is necessary to improve compliance and tax authorities' oversight.
Penalties for Non-Compliance
Strict fines may result from failure to comply with GST laws for OIDAR services. The new regulatory revisions that broaden the definition of OIDAR services make this particularly relevant. When foreign corporations have Indian clients, enforcement procedures are in place to make sure they interact with the Indian tax system appropriately. Penalties for non-registered vendors may include fines and interest-bearing back taxes, particularly if it is found that a service provider ought to have registered for GST but did not. According to the most recent revisions, markets that provide OIDAR services are also being examined. If they fulfil the legal standards, they must make sure that all vendors, whether they are selling products or services through the platform, are registered for GST. The marketplace itself may face consequences if this is not enforced.
Conclusion
OIDAR services have changed the way people use digital services and led to major changes in tax laws around the world. Fair competition is encouraged in India by the GST on OIDAR services, which guarantees equal opportunities for both domestic and foreign service providers. Businesses must remain current and in compliance with OIDAR standards as the digital landscape changes. Businesses may successfully traverse the OIDAR landscape and support the expansion of India's digital economy by being aware of the coverage, qualifications, and compliance requirements to stay ahead of the guidelines and prevent penalties.
FAQ
Q1. What is OIDAR’s full form in GST?
'Online Information and Database Access or Retrieval' (OIDAR) is the acronym for GST and describes electronic services such as software as a service (SaaS), cloud computing, digital material, and online advertising.
Q2. What qualifies as OIDAR services under GST?
Cloud services, downloadable software, and online gaming are examples of OIDAR services—digital services delivered via the internet with little or no human involvement.
Q3. How is GST applicable if both the service provider and recipient are outside India?
If both the service supplier and the recipient are located outside of India, OIDAR services are exempt from GST.
Q4. What is the GST rate for OIDAR services?
OIDAR services typically have a GST rate of 18%, which is the same as the standard rate for GST-covered services.
Q5. Who is the Authorised signatory for OIDAR?
Any Indian resident with a valid PAN card may serve as an approved signatory for OIDAR services under the GST. Additionally, the OIDAR service provider should authorise them to act on their behalf in all GST-related matters, such as registration, return filing, and payment.
Q6. Can OIDAR claim ITC?
The input tax credit is only available to registered taxpayers who are in taxable territory. However, non-resident OIDAR providers cannot claim ITC as per GST regulations.
Q7. How to check the OIDAR GST number?
Go to the GST portal website, choose the 'Search Taxpayer' page, input the GSTIN, trade name, or legal name, and click the 'Search' button to find the OIDAR GST number of an OIDAR service provider in India.
Q8. What should a foreign OIDAR service provider do to ensure compliance with the GST laws in India?
If at all practicable, foreign providers should designate a representative in India, register under the Simplified Registration Scheme using Form GST REG-10, and make sure that GST returns are filed on time.
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