India: Service Tax Net Extended To Cover Overseas Online Information And Database Access Or Retrieval Service Providers

Online Information and Database Access or Retrieval Services (OIDAR services) are currently eligible to service tax only if the service provider is located in taxable territory. The service tax net for taxability of OIDAR services has now been widened with effect from 1 December 2016 to tax provision of such services even if the service providers are located in non-taxable territory if the service recipient is located in taxable territory. The Central Board of Excise and Customs (CBEC) has made consequential amendments to Service Tax Rules 1994 (STR) and Place of Provision of Services Rules 2012 (POPS) for this purpose vide Notifications 46/2016 ST to 49/2016 ST dated 9 November 2016. Further, a Circular1 has also been issued by CBEC to clarify the amendments carried out through these Notifications.

These amendments will have a major impact on e-commerce operators located outside India and providing services to recipients in India.

What are OIDAR Services?

The definition of "online information and database access or retrieval services" has been amended to cover services which are automatically delivered over the internet, or an electronic network, where there is minimal or no human intervention. It 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; providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network; online supplies of digital content (movies, television shows, music, etc); digital data storage; and online gaming.

What is taxable territory?

Taxable territory as defined in Section 66 (52), read with Section 64 of the Finance Act 1994 (Service Tax Act) to mean the whole of India except the State of Jammu and Kashmir.

Who is liable to pay service tax on OIDAR services with effect from 1 December 2016?

  1. If the service provider is located in taxable territory such service provider will continue to be liable to pay service tax on OIDAR services.
  2. If the OIDAR service provider is located in non-taxable territory, person liable to pay service tax under various scenarios stated in amended STR and POPS is tabulated below:
S No Provision of OIDAR services Person liable to pay service tax
1. Services provided by any person located in a non-taxable territory and received by a non-assesse online recipient2
  1. If the service provider has representative in taxable territory, such representative.
  2. If there is no physical presence of the service provider or representative in taxable territory then the service provider himself or through an agent appointed by him.
2. An intermediary3 located in a non-taxable territory and received by a non-assesse online recipient Intermediary liable to pay tax, except when following conditions are satisfied by such intermediary:
  1. can make available the invoice/ bill /receipt issued by supplier which clearly identifies the service, the supplier location and the registration number of such supplier in taxable territory;
  2. neither collects, processes nor is responsible for payments between recipient and supplier of service;
  3. doesn't authorise delivery; and
  4. doesn't set general terms and conditions of supply.
3. Services provided by any person located in a non-taxable territory and received by any person located in the taxable territory (other than non-assesse online recipient).

Location of service recipient is deemed to be in taxable territory basis fulfilment of any two of the following conditions:
  1. address of the service recipient is in taxable territory;
  2. any card by which the service recipient settles payment has been issued in the taxable territory;
  3. the service recipients' billing address is in taxable territory;
  4. the internet protocol address of the service recipient is in the taxable territory;
  5. the bank account used for payment is in taxable territory;
  6. the subscriber identity module (SIM) card used is of taxable territory;
  7. the fixed land line through which the service is received by the person, is in taxable territory.
Such person receiving services.

Statutory Changes

  • STR has been amended to (a) increase the scope of the definition of OIDAR services; and (b) determine persons liable to pay service tax in case of services provided from non-taxable territory.
  • POPS Rules have been amended to delete the OIDARS from Rule 9 which specifies certain services where the place of provision is considered to be location of service providers even if the recipient is a resident of taxable territory.
  • Compliance procedures have been prescribed for registration and returns filings under the Service Tax Act for OIDAR service providers located in a non-taxable territory.


These changes will have a massive impact on the e-commerce industry which is growing rapidly in recent times and is likely to grow exponentially in future. It will trigger taxability under service tax on OIDAR services such as online gaming, educational courses digital advertising, supply of digital content mobile telecom services like ringtones etc which are provided by service providers located outside India (whether directly or through intermediaries) and received in India. It would be vital to understand the implications of such changes in light of the GST roll out in the near future.


1. Circular No. 354/149/2016-TRU dated 9 November 2016

2. "non-assesse online recipient" has been defined to mean Government, a local authority, a governmental authority or an individual receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.

3. Intermediary will include an electronic platform, a broker, an agent or any other person, by whatever name called, who arranges or facilitates provision of OIDAR service provided by person located in non-taxable territory but does not provides the main service on his account.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at

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