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Business, E-commerce, EQUALIZATION LEVY, Google Tax, Income Tax

ALL ABOUT GOOGLE TAX (EQUALIZATION LEVY) IN INDIA

ALL ABOUT GOOGLE TAX (EQUALIZATION LEVY) IN INDIA

The Google Tax was brought in by the honorable Finance Minister of India, Arun Jaitley in the Union Budget 2016. However, it is known as Google Tax around the world, yet in India it is known as the “EQUALIZATION LEVY”.

WHAT IS THIS GOOGLE TAX (EQUALIZATION LEVY)?

As per the Union Budget 2016, the budget states that any individual or entity who use Non-Resident technology services shall pay 6% of the total gross payment as the equalization levy to the government, but only if the total gross payment exceeds one lakh rupees for the single financial year. It is known as Google Tax or Equalization Levy.

This Law is specially made for the foreign e-commerce companies who has no permanently fixed establishments in India.

WHICH SERVICES COME UNDER THIS LAW?

As of now, this tax law is applicable only on online advertisements. This tax applies to advertisers, not publishers. Means it will not affect your AdSense earning. If you Publish ads on your website with AdSense, this tax doesn’t apply because you are a publisher.

But if you are an advertiser and wants to publish your company’s/product’s ads then this tax will be applicable to you. And for the better or worse the government is preparing rules to expand the list of services under this rule which may be including app marketing and many others.

For example: Let’s suppose you run an organization and need to pay Rs. 10 lakhs to a foreign company for using their online ad benefits like the way many of the populace use Google ads or Facebook ads.

With this new tax, you have to withhold 6% of Rs. 10 lakh i.e. Rs. 60,000/ – and need to pay the equalization of Rs. 9,40,000/- only. Google tax of Rs. 60,000/ – should be paid to the legislature. Assuming that the companies will bear the loss of tax and do not increase their advertising rates.

Facebook, Google, Yahoo, and LinkedIn are major payers of this tax. Excluding the LinkedIn other companies have simply burdened the users with this additional tax.

In such case you have to withhold 6% of Rs. 10 lakh i.e. Rs. 60,000/ – and need to pay the equalization of Rs. 10,00,000/-. Google tax of Rs. 60,000/ – should be paid to the legislature totalling to Rs. 10,60,000/-

Currently, the equalization levy is applicable only on online advertisements, but news of including cloud computing and online entertainment services have been reported, if this turns out to be true then companies like IBM, Microsoft, Amazon Web Services, Apple and Netflix will also be affected.

WHAT IF AN INDIAN BUSINESS OWNER OR COMPANY FAILS TO DEDUCT THIS TAX?

The Budget has proposed that any  individual or entity  fails to deduct this tax or equalization levy or doesn’t deposit it with the government, then the entity will not be allowed to consider the expenses in calculating taxable profits. This will increase the taxable income, thereby hiking the company’s tax liability.

Amazon FBA in UK from India, Amazon.in, Amzon, Business, E-commerce, E-commerce Business, EXPORT INCENTIVE, FOCUS, Import-Export, Income Tax, Income Tax Laws in USA, Indirect Taxes, IRS, UK VAT, US Taxation

INDIAN EXPORTERS… THEIR PROBLEMS & SOLUTIONS…

Indian exporters are exporting various goods like- Leather Bags, Leather Wallets, Handicrafts, Mobile Accessories, Soft toys, etc. to countries like- Dubai, Kuwait, Middle-east, Australia, Europe, etc. since long time.

Also, with the advancement of internet, many of the young entrepreneurs have started to export goods through online e-Commerce websites like- Amazon.com (USA), Amazon.co.uk, ebay.com (USA), etc.

Did you know that, Exporters are eligible for 100% refund of following taxes paid by them on export of goods-

(1) Central Excise Duty (12.5%),

(2) VAT/CST (5%-14.5%),

(3) Service Tax (15%), etc.

 

Also, Exporters are eligible for various export incentives which is about 4%-8% (as per product exported) of value of goods exported.

 

Most of the exporters are not aware about the incentives available to them which reduces their overall profit margin by 25%-30%.

 

Due to lack of awareness, many exporters export their goods as free samples and then receive Foreign Inward Remittance in their accounts or accounts of their family members & relatives. After withdrawing the export proceeds, they close such account without compliance with RBI Circulars in respect to closure of FIRC which results in serious non-compliance of Foreign Exchange Regulation Act, 1999 (FERA). Also, the Bank has your KYC details which are submitted by the Bank to the Reserve Bank of India (RBI) after 12 months from the date of receipt of foreign inward remittance. RBI then traces such defaulters and harsh action may be taken under the Prevention of Money Laundering Act (PMLA).

 

Such export proceeds remain unreported in Income Tax while submitting annual income tax return.

 

What if your export margins can increase by 25%-30% ?

What if you can comply with RBI/ FERA norms ?

What if you can report your actual sales & net profit figures to the Income Tax department ?

 

Yes, you can do it…!!

 

You may be located anywhere in India, we shall assist you in:

(1) Obtaining refund of- Central Excise, VAT/ CST, Service Tax paid on goods exported out of India,

(2) Obtaining various export incentives provided by Government of India,

(3) Obtaining Bank Loan for purchase of goods for exports,

(4) Proper accounting of purchases, sales, income, expenses, bank reconciliation, Receivable/ Payable monitoring, etc.

(5) Filing of VAT Returns, Income Tax Return, etc.

(6) Clearance of e-BRC with your AD Banker for Foreign Inward Remittance Certificate (FIRC) for amount received for inward remittance,

(7) Payment of Import Duties in the country of export,

(8) Payment of VAT/ Sales & Use Tax in country of export (for USA & UK),

(9) Payment of Federal taxes/ Income taxes in country of export (for USA & UK).

 

We relieve you from all the hassles, all the tough part, the calculations, the reconciliations, the taxes… all of them… and allow you to concentrate on the main part of your business… INCREASE SALES… INCREASE PROFITS…!!

Author: KSJ eCom Consultants 

e-Mail: KSJ.eCom.Consultants@gmail.com

Amazon FBA in UK from India, Amazon.in, Amzon, E-commerce, E-commerce Business, HMRC, Import-Export, Indirect Taxes, UK VAT, VAT

UNITED KINGDOM (UK) VALUE ADDED TAX (VAT) COMPLIANCE FOR SELLING THROUGH AMAZON FBA – BY CA VIKRAM JAIN

UNITED KINGDOM (UK) VALUE ADDED TAX (VAT) COMPLIANCE FOR SELLING THROUGH AMAZON FBA – BY CA VIKRAM JAIN

 E- Commerce is all about… Growing Fast… or Dying Slow…!!

  1. APPLICABILITY OF UK VAT

If you sell goods in United Kingdom, it is likely that you will be required to register for Value Added Tax (VAT). VAT in the United Kingdom is a tax on consumer spending. It is collected by VAT-registered traders on their sales within the EU territory, and passed on to the national tax authorities via VAT tax return filings.

You shall be required to get a UK VAT number if you comply with any One of the below mentioned conditions:

  1. You store your inventory in a warehouse situated in United Kingdom,
  2. You have your own showroom/ warehouse/ place of business in United Kingdiom,
  3. Your annual sales in United Kingdom exceeds £83,000/- during the financial year i.e. from April of current year to March next year.

You must register for VAT with HM Revenue and Customs (HMRC) if your business’ VAT taxable turnover is more than £83,000/-.

When you register, you’ll be sent a VAT registration certificate. This confirms:

  • your VAT number
  • when to submit your first VAT Return and payment
  • your ‘effective date of registration’ – this is the date you went over the threshold, or the date you asked to register if it was voluntary

You can register voluntarily if your turnover is less than £83,000, unless everything you sell is exempt. You’ll have certain responsibilities if you register for VAT.

Your VAT responsibilities: From the effective date of registration you must:

  • charge the right amount of VAT
  • pay any VAT due to HMRC
  • submit VAT Returns
  • keep VAT records and a VAT account

You can also reclaim the VAT you’ve paid on certain purchases made before you registered.

While you wait you can’t charge or show VAT on your invoices until you get your VAT number. However, you’ll still have to pay the VAT to HMRC for this period.

You should increase your prices to allow for this and tell your customers why. Once you’ve got your VAT number you can then reissue the invoices showing the VAT.

  1. REGISTER FOR VAT

For UK VAT registration, you need to provide details like:

  • Expected Annual turnover,
  • business activity and
  • bank details.

Your registration date is known as your ‘effective date of registration’. You’ll have to pay HMRC any VAT due from this date.

You should get a VAT registration certificate within 14 working days, though it can take longer.

You can appoint an accountant (or agent) to submit your VAT Returns and deal with HMRC on your behalf.

  1. TAXABLE TURNOVER FOR VAT

You must register for VAT with HM Revenue and Customs (HMRC) if your business’ VAT taxable turnover is more than £83,000/-.

VAT taxable turnover is the total value of everything you sell that isn’t exempt from VAT.

You must register for VAT with HM Revenue and Customs (HMRC) if it goes over the current registration threshold in a rolling 12-month period. This isn’t a fixed period like the tax year or the calendar year – it could be any period, eg the start of June to the end of May.

  1. PURCHASES MADE BEFORE REGISTRATION

There’s a time limit for backdating claims for VAT paid before registration. From your date of registration the time limit is:

  • 4 years for goods you still have, or that were used to make other goods you still have,
  • 6 months for services

You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.

You should reclaim them on your first VAT Return (add them to your Box 4 figure) and keep records including:

  • invoices and receipts
  • a description and purchase dates
  • information about how they relate to your business now
  1. CHANGES TO YOUR DETAILS

When to tell HMRC: You need to tell HM Revenue and Customs (HMRC) about any changes to the following within 30 days or you could face a financial penalty:

  • the name, trading name or main address of your business
  • the accountant or agent who deals with your VAT
  • the members of a partnership, or the name or home address of any of the partners

Changing bank details: You must tell HMRC at least 14 days in advance if you’re changing your bank details.

You’ll also have to tell your bank to change your Direct Debit details if you pay your VAT by Direct Debit, but you shouldn’t do this within 5 banking days before or after your VAT return is due.

You must write to the Annual Accounting Registration Unit to change your Direct Debit details if you use the Annual Accounting Scheme. Include your registration number.

Death and illness: You must tell HMRC within 21 days if you take on the VAT responsibilities of someone who has died or is ill.

Author: CA Vikram Jain

WhatsApp: +91 9829040039

You may contact the author at jainvikram.ca@gmail.com

Amazon.in, Amzon, Business, E-commerce, E-commerce Business, GST, Import-Export, Income Tax, Income Tax Laws in USA, Indirect Taxes, IRS, US Taxation, VAT

E- Commerce is all about… Growing Fast… or Dying Slow…!! Series 1, Lesson 5:

CA Vikram Jain

E- Commerce is all about… Growing Fast… or Dying Slow…!!

Series 1, Lesson 5:

TAXATION OF INDIAN RESIDENTS SELLING IN USA

As per Department of Treasury, Internal Revenue Services, United States of America-

“A Non- resident alien usually is subject to U.S. Income Tax only on US Source Income“.

US Source Income- for Sales of inventory – Geographical area where the goods are sold shall be considered as determining factor for US Source Income.

Inventory property-

Inventory property is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business.

Income from the sale of inventory that you purchased is sourced where the property is sold.

Generally, this is where title to the property passes to the buyer.

For example, income from the sale of inventory in the United States is U.S. source income, whether you purchased it in the United States or in a foreign country.

Income from the sale of inventory property that you produced in the United States and sold outside the United States (or vice versa) is partly from sources in the United States and partly from sources outside the United States.

These rules apply even if your tax home is not in the United States.

Conclusion- This means, if you are a non-resident in USA and sell goods in geographical territories in USA, you shall be liable to pay Income Tax in USA.

Financial Year in USA ends on- 31st December.

Due date for filing Income Tax Return in USA- within 105 days from end of Financial year i.e. 15th April of next year.

Eg.: For FY 01.01.2015 to 31.12.2015, due date for filing income tax return shall be 15.04.2016.

Important Note: As per Double Tax Avoidance Agreement (DTAA) between USA & India, if you pay tax in USA, you can claim benefit of the tax paid in USA while filing your Income Tax Return in India.

Non- compliance to Income Tax laws in USA-

Intentional non- compliance to USA Income Tax laws is considered as “TAX EVASION” which is considered as an act liable for Criminal prosecution in USA.

Most of the e-Commerce Sellers wish to comply with laws of the land where they trade in business. Also, with professional help, they can buy mental peace and concentrate on the core business activities of exports, exploring new market places, etc.

However, due to non- availability of professional help they send goods as free samples, gifts, etc. which is against the laws.

Also, they cannot claim export benefits, incentives, drawbacks, etc. and end up in non-compliance which may cause serious business injuries at a later stage.

Benefits of exporting goods in an organized manner-

COMPARATIVE ANALYSIS: Export of Goods to USA through official channel
V/s.
Export of Goods to USA as Sample/ Free gift

  1. Foreign Exchange Management Act 1999

(a). Selling through official channel- Complied with.

(b). Supplying goods as free sample/ gift- Annual maximum limit for supply of free gifts under FEMA is Rs. 1.00 Lakhs. If goods are supplied as free gift above the prescribed limit, it shall be deemed to be contravention of FEMA and shall be considered as civil/ criminal offence.

  1. Foreign Inward Remittance Certificate (FIRC)

(a). Selling through official channel- FIRC (for payment received in foreign currency) is closed on receipt of export proceeds and RBI guidelines are complied with.

(b). Supplying goods as free sample/ gift- RBI/ FEMA guidelines can’t be complied with against goods sent as free gift.

  1. Indian Income Tax Act, 1961

(a). Selling through official channel- For turnover upto Rs. 2.00 Crore – Assessee has to declare net profit @ 8% (No audit required). For turnover above Rs. 2.00 Crore– Audit under Section 44AB is to be conducted and Tax Audit Report to be obtained in Form 3CA/ 3CB & Form 3CD.
(b). Supplying goods as free sample/ gift- No proper financial books of accounts can be made available for audit. No Tax Audit Report can be issued as goods are supplied as free sample.

  1. Refund of Excise Duty

a). Selling through official channel- Excise duty is levied @ 12.50% by the manufacturer. The same is- waived off or refundable in full, for export of goods through official channel which results in decrease in cost of purchase.

(b). Supplying goods as free sample/ gift- No refund of Excise duty is available for goods sent as free samples/ gifts.

  1. Refund of Local Sales Tax

(a). Selling through official channel- Local Sales Tax (nearly 14%) is waived in full for export of goods against Form H- for exports- through official channel which results in decrease in cost of purchase.
(b). Supplying goods as free sample/ gift- No refund of Sales tax is available for goods sent as free samples/ gifts.

  1. Refund of Service Tax

(a). Selling through official channel- Service Tax @ 15% is levied on freight, transportation, insurance, currency conversion charges, Custom House Agency charges, etc. The same are refundable in full – for exports- through official channel which results in decrease in cost of purchase.
(b). Supplying goods as free sample/ gift- No refund of Service tax is available for goods sent as free samples/ gifts.

  1. Export incentive

(a). Selling through official channel- Export incentives are available on goods exported through official channel @ 2% to 5% on FOB value of goods exported various products.

(b). Supplying goods as free sample/ gift- No such incentive is available for goods sent as free samples/ gifts.

  1. Credit facilities

(a). Selling through official channel- Bank Loan/ Credit limits @ 6-7% per annum for exporters exporting goods through official channel.

(b). Supplying goods as free sample/ gift- No such credit limit is available.

You may hire a professional consultant who can guide you in a systematic manner for growth in your exports business.

Author: CA Vikram Jain

In case you have any query, kindly feel free to contact the author at his email: jainvikram.ca@gmail.com

Amazon.in, Amzon, Business, E-commerce, E-commerce Business, Import-Export, Income Tax

E- Commerce is all about… Growing Fast… or Dying Slow…!! Series 1, Lesson 4:

CA Vikram Jain

E- Commerce is all about… Growing Fast… or Dying Slow…!!

Series 1, Lesson 4:

START SELLING ON E-COMMERCE…!

For how to sell your products on Amazon.in, you can visit the following link:
https://services.amazon.in/services/sell-on-amazon/faq.html

What is Sell on Amazon (SOA) ?
Ans.: Sell on Amazon is a program that enables you to list and sell your product on Amazon.in

How does selling on Amazon.in work?
Selling on Amazon.in is easy. First you list the products that you want to sell on Amazon.in marketplace. Customer sees your product and makes a purchase. You will receive a notification to ship the product. You deliver the product to the customer and confirm shipment or let Amazon fulfill the order for you through FBA or Easy ship. Amazon will deposit the funds into your bank account after deducting its fees.

What products can I sell on Amazon.in?
You can sell items in the following categories:
Apparel, Automotive, Baby Products, Batteries, Beauty, Books, Consumables, Consumer Electronics (including Cameras and Video Games – Consoles), Digital Accessories (including Mobile Accessories, Electronics Accessories and PC Accessories), Groceries, Home, Jewelery, Kitchen, Luggage, Mobile Phones, Movies, Musical Instruments, Office and Stationary, Personal Care Appliances, Personal Computers, Pet Supplies, Software, Shoes and Handbags, Tablets, Toys, Video games (consoles and games) and Watches.

What do I need to register as a seller on Amazon.in?
You will need the following information to register:
▪ Your company details
▪ Your contact details – email and phone number
▪ Basic information about your business
▪ VAT/CST Details are mandatory and need to be provided after registration

A question arises in our mind… What if I wish to Sell in USA, UK?
Solution:
(to be continued…)

Author: CA Vikram Jain

In case you have any query, kindly feel free to contact the author at his email: jainvikram.ca@gmail.com

Business, E-commerce, E-commerce Business, GST, Income Tax, Indirect Taxes, VAT

E- Commerce is all about… Growing Fast… or Dying Slow…!! Series 1, Lesson 3:

CA Vikram Jain

E- Commerce is all about… Growing Fast… or Dying Slow…!!

Series 1, Lesson 3: 


CREATE YOUR OWN IDENTITY…!

Your own identity, in business sense, means… a business name for yourself… it may be a Proprietorship firm, a Partnership firm, One Person Company (OPC) (Share Capital/ Turnover not more than prescribed limit), a Limited Liability Partnership (LLP), Private Limited Company… your own small firm where you shall be the boss… and shall make all your decisions…

You shall also require some legal documents for your business, including- Permanent Account Number (PAN) registered with Income Tax department, Aadhaar Card, Bank Account, Value Added Tax (VAT) Registration Certificate, Import Export Code (IEC) registered with Director General of Foreign Trade (DGFT) applicable for your region, etc.

A question arises in our mind… What next?

Solution: Start Selling on e-Commerce…!!

(to be continued…)

Author:

CA Vikram Jain

In case you have any query, kindly feel free to contact the author at his email: jainvikram.ca@gmail.com

Amzon, Business, E-commerce, E-commerce Business

E- Commerce is all about… Growing Fast… or Dying Slow…!! Series 1, Lesson 2:

CA Vikram Jain

E- Commerce is all about… Growing Fast… or Dying Slow…!!

Series 1, Lesson 2: 

LET’S GO… GLOBAL…!!

In these times of Change, it’s now the time to change your Business Model so as to reach Customers across all frontiers… With easy to use online web based software’s, you can sell your products on Amazon.in, Flipkart.comSnapdeal.comPaytm.com, etc. anywhere in India.
But did you know that, you can sell products available in your city/ region/ state/ country to USA, UK, etc. and earn in US Dollars / Pound Sterling and that too at the comfort of your Home/ Local Office.

A question arises in our mind… How?

Solution: Create your own identity…!!
(to be continued…)

Author:

CA Vikram Jain

In case you have any query, kindly feel free to contact the author at his email: jainvikram.ca@gmail.com

E-commerce, E-commerce Business, Indirect Taxes

E- Commerce is all about… Growing Fast… or Dying Slow…!!

Author: CA Vikram Jain

E- Commerce is all about… Growing Fast… or Dying Slow…!!

Series 1, Lesson 1: 

E- COMMERCE BUSINESS IN INDIA

With the advent of online e-Business-2-Consumer (e-B2C) business in India… we have all been an important part of the spur in the e-Commerce business. The NexGen Entrepreneur, who have started to sell their products on these websites, namely- Flipkart, Amazon, Snapdeal, Paytm, etc. have tasted the sweet scent of success. They have discovered a new market place for their goods across a National platform where prospective buyers meet several intending sellers at the most competitive prices.

However, as per Industry Sources, India’s e-commerce players would witness very tough competition in the next one to two years, and a section of them including biggies may shut shop unless they create a sustainable business model. Majority of the e-tailers are using their capital to subsidise consumers to give deep discounts and grow the topline because the moment they withdraw the discounts, the topline falls. Also, in many product segments, the margins have drastically come down to 10%-15% (after deducting Commission to e-Com websites, Service Tax, Sales Tax, packing, courier & delivery charges, etc.).

A question arises in our mind… What next?

Answer: Lets go… Global…!! (… to be continued)

Author: CA Vikram Jain

In case you have any query, kindly feel free to contact the author at his email: jainvikram.ca@gmail.com

GST, Indirect Taxes

ECLECTIC PAYMENT MODES FOR TAXPAYERS UNDER GST REGIME

ECLECTIC PAYMENT MODES FOR TAXPAYERS UNDER GST REGIME

The only option for making tax payment today, is online mode. Whereas GST , which is based on Information Technology ,will have various options for tax payment. Under GST the tax payments are proposed to be done through Goods and Services Tax Network – GSTN. There are Various modes proposed for payment by taxpayers, such as , Internet Banking through authorized banks along with credit card and debit card; Over the Counter payment (OTC) through authorized banks; Payment through NEFT and RTGS from any bank (including other than authorized banks).

The taxpayer would be able to choose his preferred bank for Internet Bankingfrom the list of various authorized banks, registered with GSTN. OTC mode is proposed to be available for payments up to Rs. 10,000/- per challan only. Credit and Debit Cards of all banks shall be accepted, preferably with more than one payment gateways. In addition, the taxpayer would be required to pre-register their credit card, from which the tax payment is intended, with the GSTN system, which may be put to verification process by taking a confirmation from the credit card service provider.

The payment processes is proposed to electronically generate challan from GSTN Common Portal in all proposed modes with no manual intervention. GSTN is intended to facilitate hassle free, anytime, anywhere mode of payment of tax with paperless transactions. Registered tax payer or his authorized person would be allowed to generate challan where basic details such as name, address, e-mail, mobile no. and GSTIN of the tax payer will be auto populated. Even for unregistered person, temporary Registration number would be granted on GSTN Common Portal, by any tax authority for facilitating tax payments, which would be later converted into a regular registration number.

The tax payers could partially fill in details and save the challan form, for completion at a later stage. A saved challan could be edited before finalization. After finalization the challan would be generated, for payment of taxes, available for printing for future record. The finally generated challan would be assigned a 14-digit CPIN (Common Portal Identification Number), having date “yymm” followed by 10-digit. After the challan is generated, it is proposed to be frozen, not allowed to be modified. The CPIN would be valid for a period of seven days and 30 days when payment has been made through NEFT or RTGS. On the day immediately after the date of expiry of validity period GSTN would purge all unused CPINs.

However, other means of payment, such as payment by book adjustment as is presently being allowed by Government of India to some Departments / State Governments or payment by debit to export scrips, while paying tax are likely to be discontinued  under the GST Regime.

Contributed by Ms. Ruhi Jhota:

Ruhi Jhota is an Advocate and practicing in Indirect Taxes. She possesses strong research background which is required to present the complexity of taxation in terms that a layman can understand.

 Contact for queries: ruhijhota@gmail.com

Indirect Taxes

Coverage of Service Tax widened for OIDAR services

World is getting smaller with the use and access of internet and with that the nature of activities to a larger extent have transformed to online. In line with recent developments in technology the net of Service Tax has been expanded in order to cover online transactions within its leviability.

The scope of Online Information and Database Access or Retrieval (OIDAR) services has been widened vide amendment to Service Tax Rules, 1994 with effect from 01.12.2016, to mean services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology. The scope of OIDAR services also includes electronic services such as advertising on the internet, providing cloud services, provision of e-books, movie, music, software and other intangibles via telecommunication networks or internet. OIDAR services will also take into account providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network, online supplies of digital content like movies, television shows, music, etc., digital data storage and online gaming.

The rule to determine the place of provision of service has been amended, and the OIDAR services are omitted from Rule 9 of POPS Rules, 2012 and they are now governed as per Rule 3 of POPS. Accordingly, the place of provision of service will be location of the service receiver in case of OIDAR services with effect from 01.12.2016. However, if the location of the service receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service, except in case of OIDAR services.

If the OIDAR service provider is located in taxable territory such service provider will continue to be liable to pay service tax. With regard to expansion of scope of OIDAR services under Service Tax net, when service provided by person located in non-taxable territory to a non-assessee online recipient, the representative appointed by the service provider in taxable territory will pay tax and in case if no representative or no physical presence in taxable territory of the service provider, he himself or through an agent appointed by him for the purpose of paying Service Tax will bear the liability.

When OIDAR services are provided by any person located in a non-taxable territory to any person located in the taxable territory but other than non-assesse online recipient, liability will be on such person receiving services. If an intermediary located in the non-taxable territory including an electronic platform, a broker, an agent or any other person, by whatever name called, who arranges or facilitates provision of such service but does not provides the main service on his account shall be deemed to be receiving such services from the service provider located in non-taxable territory and providing such services to the non-assesse online recipient. Thereby the Government has stretched the scope of Service Tax to cover of OIDAR services to cover even the services received from a non-taxable territory.

Contributed by: Ruhi Jhota, 

Ruhi Jhota is an Advocate and practicing in Indirect Taxes. She possesses strong research background which is required to present the complexity of taxation in terms that a layman can understand.

Contact for queries : ruhijhota@gmail.com