IndiaFilings / Learn / Business Startup / Service Tax Online Services
Service Tax on Online Services - IndiaFilings

Service Tax on Online Services

Services provided online like Software As A Service (SAAS) or services that extensively use the internet for delivery of services are mostly classified as “Online Information and Database Access or Retrieval Services” (OIDAR). In this article, we look at the applicability of service tax on “Online Information and Database Access or Retrieval Services” (OIDAR).

Online Services - OIDAR Services

“Online information and database access or retrieval services” are services in relation to online information and database access or retrieval or both, in electronic form through computer network, in any manner. There has been a recent modification to the definition of OIDAR services with effect from December 1st, 2016, as follows: “Online information and database access or retrieval services” refers to services whose delivery is mediated by information technology over the internet or an electronic net work and the nature of which permits their supply to be  fundamentally automated and involving minimal human intervention, and not possible to guarantee in the nonexistence of information technology and includes electronic services such as:
  1. Advertising on the internet;
  2. Providing cloud services;
  3. Provision of e-books, movie, music, software and other intangibles via telecommunication networks or internet;
  4. Providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network;
  5. Online supplies of digital content (movies, television shows, music, etc);
  6. Digital data storage; and
  7. Online gaming
Hence, there are two key features for a service to be classified as and online information and database access or retrieval services:
  • Provision of Service via Information Technology (utilizing internet or other electronic network); and
  • Automatic delivery of such service, i.e., with minimum human intervention

Service Tax on Online Services

Service tax on online information and database access or retrieval services are governed by Place of Provision of Services Rules. As per the Place of Provision of Services Rules, the place of supply is the location of the service recipient for online service listed in this article. Hence, this change effectively means that online information and database access or retrieval services supplied by foreign service provider will now be taxable. However, governmental authorities and individuals related to personal use have been provided exemption from service tax liability under this regulation.

Highlights of Notification No 48/2016-ST - Amended Service Tax Rules

  1. Government agencies, individuals utilizing online information and database access or retrieval services for personal use have been defined as “non-assessee online recipients”.
  2. B2C online information and database access or retrieval services transactions have been removed from reverse charge mechanism and the service provider has been made legally responsible to pay service tax.
  3. Any person representing the overseas service provider shall be the person liable to pay Service tax in India;
  4. Persons who receive online information and database access or retrieval services are deemed to be located in the taxable territory - if any two of the subsequent non-contradictory conditions are satisfied:
    • The location of address that is presented by the service recipient via internet is in taxable territory;
    • Credit or debit or any other card by which the service recipient settles payment has been issued in the taxable territory;
    • Service recipient’s billing address is in the taxable territory;
    • Internet protocol address of the device utilized by the service recipient is in the taxable territory;
    • Service recipient’s bank in which the account utilized for payment is maintained is in the taxable territory;
    • Country code of the subscriber identity module (SIM) card utilized by the service recipient is of taxable territory; and
    • Location of the service recipients fixed land line through which the service is received by the person, is in taxable territory.
IndiaFilings
Updated on: March 18th, 2020

Popular Post

Download ePAN Card – Get ePan from NSDL & UTIITSL
80 Small Business Ideas

Starting a small business can be a transformative venture, offering the exciting opportunity...

Nadakacheri – Income Caste Certificate Download Online in Karnataka
TDS Rate Chart for Financial Year 2025-2026 (Assessment Year 2026-2027)

Tax deduction at source, shortly and popularly known as TDS, was introduced by the Income Tax...

Divorce Rules in India: Everything You Need to Know
How To Download GST Registration Certificate Online?

Goods & Services Tax Certificate is issued to people who are registered under GST...

PAN Card Cancellation Online
Find Complete Details of GST Registration Procedure

GST registration applies to all individuals and entities supplying goods or services in India. GST...

Check Your PF Claim Status Online Using PF Tracking ID
Gift Tax in India: Applicability, Exemptions and Rules

Gift tax in India is applied when the value of the received gift exceeds ₹50,000 in the...

Check Your PF Claim Status Online Using PF Tracking ID
Old Regime vs New Regime 2025: Which Tax Regime is Better for You?

The Union Budget 2025 has brought significant changes to India’s personal income tax structure, raising the...

Check Your PF Claim Status Online Using PF Tracking ID
What is the minimum turnover for GST?

The Goods and Services Tax (GST) is an indirect tax system introduced in India in 2017. It functions...

Check Your PF Claim Status Online Using PF Tracking ID
How can I check if a trademark is registered?

A trademark search is simply checking if another person or organization does not already own the...

Check Your PF Claim Status Online Using PF Tracking ID
Section 194H of the Income Tax Act: TDS on Commission & Brokerage

Section 194H of the Income Tax Act in India mandates the deduction of Tax at Source (TDS) on commission or brokerage...

Check Your PF Claim Status Online Using PF Tracking ID
Section 80G Deduction - Income Tax Act

Section 80G Deduction is a facility available in the Income Tax Act which allows taxpayers to...

Check Your PF Claim Status Online Using PF Tracking ID
Crypto Tax in India: Taxation On Cryptocurrency

The Income Tax Department (ITD) has not provided specific guidance on crypto taxes for Indian investors. However...

Check Your PF Claim Status Online Using PF Tracking ID
Internal Audit Applicability Under Companies Act, 2013

Internal audit applicability is a critical concept for companies in India, impacting various...

Check Your PF Claim Status Online Using PF Tracking ID
Difference between Private and Public Company

In the business world, two main types of companies exist: private company and public company...

Check Your PF Claim Status Online Using PF Tracking ID
New GST Rules for Rent

Ministry of Finance vide a Notification No 05/2022- Central Tax (Rate) dated 13.7.2022 has issued...

Check Your PF Claim Status Online Using PF Tracking ID
GSTR-1 and GSTR-3B Due Date Extension - New Due Dates For January 2025

The Central Board of Indirect Taxes and Customs (CBIC) has recently announced an extension...

Check Your PF Claim Status Online Using PF Tracking ID
Different Depreciation Rates under Companies & Income Tax Act

Depreciation is a key concept in finance and accounting. It helps us manage how the value of...

Check Your PF Claim Status Online Using PF Tracking ID
Form 10IA - Section 80DD Deduction

Form 10IA of the Income Tax Department must be filed by taxpayers claiming income tax deduction...

Check Your PF Claim Status Online Using PF Tracking ID
GST on Used Cars: New 18% Tax Rate Explained

The Goods and Services Tax (GST) system in India has been a significant reform in the country's...

Check Your PF Claim Status Online Using PF Tracking ID
MSME Registration - Udyam Registration

India's Gross Domestic Product (GDP) benefits significantly from the substantial...

Check Your PF Claim Status Online Using PF Tracking ID
Section 43B(h) - New MSME 45 Days Payment Rule

The Finance Act, 2023 introduced the MSME 45-day payment rule under Section 43B(h) of the Income Tax Act...

Check Your PF Claim Status Online Using PF Tracking ID
Direct Tax Vivad Se Vishwas (DTVSV) Scheme, 2024

The Direct Tax Vivad Se Vishwas (DTVSV) Scheme, 2024, was announced by Union Finance Minister...