Everything You Need to Know About OIDAR in GST: Registration & Tax Rates

Introduction

With the increasing consumption of digital services in India, the Indian government has brought Online Information and Database Access or Retrieval (OIDAR) services under the Goods and Services Tax (GST) framework. Understanding OIDAR in GST is crucial for foreign service providers offering digital services in India.

This guide explains what OIDAR in GST entails, the applicable OIDAR tax rates, the OIDAR registration process, and how foreign entities comply with GST on digital services in India. Additionally, we will discuss the place of supply for OIDAR and GST returns for OIDAR, helping businesses ensure compliance with Indian tax laws.

Also Read: Apply for GST Registration with Registerkaro

What is OIDAR in GST?

OIDAR (Online Information and Database Access or Retrieval) services refer to digital services provided over the Internet with minimal human intervention. Under GST, these services are taxable when consumed in India, even if provided by foreign companies.

Examples of OIDAR in GST include:

• Cloud-based software and data storage
• Online advertisements and digital marketing
• Subscription-based media like e-books, music, and video streaming
• Online gaming services
• Web hosting and domain registration
• Digital education services

Since these services are consumed in India, the Indian government levies GST on them, ensuring tax compliance for foreign service providers.

Who is Liable to Pay GST on OIDAR Services?

The liability to pay GST on digital services depends on whether the recipient is a registered business (B2B) or an individual consumer (B2C).

1. If the recipient is a registered business (B2B)
   • The recipient (Indian business) must pay GST under the reverse charge mechanism (RCM).
   • The foreign service provider does not need GST registration in India.
2. If the recipient is an individual consumer (B2C)
   • The foreign service provider must register under OIDAR in GST and collect GST from Indian consumers.
   • The service provider must file GST returns for OIDAR and remit the tax to the Indian government.

This taxation system ensures that foreign digital service providers contribute their fair share of taxes in India.

Applicability of GST for Foreign Service Providers

Foreign service providers offering digital services to Indian consumers must comply with GST on digital services. Key aspects of GST applicability include:

1. GST Registration Requirement

Foreign companies providing OIDAR in GST services to Indian consumers must obtain GST registration, even if they have no physical presence in India.

2. Applicable OIDAR Tax Rates

The standard OIDAR tax rate is 18% GST on digital services. There are no exemptions for foreign service providers, and they must charge this tax on their invoices.

3. Place of Supply for OIDAR

Determining the place of supply for OIDAR services is essential for tax computation. For GST purposes, the place of supply is considered to be India if:

• The consumer’s billing address is in India.
• The payment is made using an Indian bank account.
• The IP address of the user is traced to India.

4. Tax Collection and Compliance

Once registered, foreign businesses must collect GST on their invoices and file GST returns for OIDAR regularly.

Compliance with OIDAR in GST is crucial to avoid penalties and ensure seamless operations in India.

Registration Process for OIDAR Under GST

The OIDAR registration process is mandatory for foreign service providers offering digital services in India. The steps for registration include:

Step 1: Application Submission

Foreign businesses must apply for GST registration via the GST portal under the category of OIDAR in GST.

Step 2: Submission of Required Documents

The following documents are required for the OIDAR registration process:

• Business incorporation certificate
• PAN (if applicable) or tax identification number from the home country
• Authorized representative details (if applicable)
• Bank account details

Step 3: Appointment of an Authorized Representative

Foreign businesses without a physical presence in India must appoint an authorized representative to handle their GST compliance.

Step 4: GST Identification Number (GSTIN) Allocation

Upon successful verification, a GSTIN (Goods and Services Tax Identification Number) is issued, allowing the foreign business to legally collect and remit GST on digital services in India.

Completing the OIDAR registration process is crucial for tax compliance and smooth business operations.

GST Filing and Compliance for OIDAR Businesses

Once registered, foreign service providers must fulfill their compliance obligations under OIDAR in GST. This includes:

1. Filing GST Returns for OIDAR

Registered businesses must file GSTR-5A, a special return for foreign digital service providers, by the 20th of each month.

2. Payment of GST on Digital Services

Collected GST must be deposited with the Indian government by the due date. Non-compliance can lead to penalties.

3. Maintaining Records

Foreign service providers must maintain transaction records, including invoices, payments, and customer details, for at least five years.

By fulfilling these obligations, businesses can ensure smooth compliance with OIDAR in GST regulations.

Conclusion

The taxation of OIDAR in GST plays a crucial role in ensuring that foreign digital service providers contribute fairly to India’s tax system. Whether you operate a cloud-based software platform, an online streaming service, or a digital education portal, understanding the OIDAR tax rates and complying with GST on digital services is essential for seamless operations. One of the key aspects of compliance is determining the place of supply for OIDAR, as it directly affects tax liability and registration requirements. Additionally, the OIDAR registration process must be completed to ensure legal recognition under GST laws, allowing businesses to provide uninterrupted digital services in India.

Apart from registration, businesses must focus on timely filing of GST returns for OIDAR to avoid penalties and legal complications. Adhering to the prescribed OIDAR tax rates ensures smooth operations while maintaining compliance with Indian tax laws. With the digital economy growing rapidly, businesses providing online services must proactively meet these obligations to sustain and expand their presence in India.

Ready to get started? Let RegisterKaro simplify your OIDAR in GST compliance with expert guidance. From managing the OIDAR registration process to ensuring accurate filing of GST returns for OIDAR, we handle everything, allowing you to focus on growing your digital business. Reach out to us and make your compliance journey seamless and hassle-free. Contact our support team at support@registerkaro.in today.

Frequently Asked Questions (FAQs)

1. What is OIDAR in GST?

OIDAR in GST refers to digital services delivered over the internet, such as cloud computing, digital media, and online advertising.

2. Who needs to register under OIDAR GST?

Foreign businesses providing GST on digital services to Indian consumers must complete the OIDAR registration process.

3. What are the applicable OIDAR tax rates?

The standard OIDAR tax rates in India are 18% GST on digital services provided to Indian consumers.

4. How is the place of supply for OIDAR determined?

The place of supply for OIDAR is India if the consumer’s billing address, payment method, or IP address is linked to India.

5. What are the GST filing requirements for OIDAR businesses?

Foreign service providers must file GST returns for OIDAR through GSTR-5A by the 20th of every month.