GST on Cross-Border Digital Services: How OIDAR Works

OIDAR — online information and database access or retrieval services — governs GST on digital services supplied into India from outside it. Where the recipient is a registered business, liability generally falls on the recipient under reverse charge. Where the recipient is a non-taxable individual consumer, the overseas supplier is generally required to register in India and pay.

The distinction that drives everything

Treatment turns on who the recipient is.

Business recipients registered under GST generally account for the tax under reverse charge, paying in cash and claiming credit subject to normal conditions.

Non-taxable online recipients — broadly, individual consumers and unregistered persons — cannot be made to account for tax, so the obligation shifts to the overseas supplier, who must register in India through a simplified route and pay.

An intermediary facilitating the supply may be deemed to be the supplier in certain circumstances, which is significant for platforms and app stores.

What counts as OIDAR

The concept targets services delivered over the internet with minimal human intervention — essentially automated. Advertising, cloud services, e-books and digital content, software supplied online, online gaming and data storage sit within it.

The boundary that matters in practice is between an automated digital service and a service merely delivered using the internet. Professional advice delivered by email is not OIDAR, because there is substantial human intervention. An automated subscription platform is. The line is not always obvious, and the classification determines who bears the compliance obligation.

For Indian businesses buying digital services

The practical exposure is under-declared reverse charge on foreign digital subscriptions. Every recurring foreign software, cloud, advertising and platform charge should be reviewed.

Reconciling foreign remittances against reverse charge entries is the most effective control, because a payment leaving the country for a service with no corresponding reverse charge entry is either an error or requires an explanation.

For overseas suppliers into India

Assess whether Indian recipients include non-taxable persons, since that determines whether Indian registration is required. Where required, a simplified registration route applies with periodic returns.

Related reading

• the reverse charge checklist — GST Reverse Charge Mechanism: A Practitioner’s Checklist
• input tax credit — GST Input Tax Credit: Conditions, Blocked Credits and Disputes