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Withdrawal of exemption from service tax on cross border B2C OIDAR services provided online/electronically from a non-taxable territory to consumers in taxable territory in India-reg.

Service Tax - 202/12/2016 - Dated:- 9-11-2016 - Circular No. 202/12/2016-Service Tax F.No. 354/149/2016-TRU Government of India Ministry of Finance Department of Revenue (Tax Research Unit) Dated the 9th November, 2016 To, Principal Chief Commissioners of Customs and Central Excise (All) Principal Chief Commissioners of Central Excise & Service Tax (All) Principal Director Generals of Goods and Service Tax/System/CEI Director General of Audit/Tax Payer Services Principal Commissioners/ Commi .....

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ndustry or any other business or profession are exempted [cross border B2C (business to consumer) services provided in taxable territory]. On the other hand, services received by other persons in taxable territory from non-taxable territory [cross border B2B (business to business) services] are taxable under reverse charge i.e. service recipient in taxable territory pays tax. Further, in view of Place of Provision of Service Rules, 2012 rule 9(b), with respect to online information and database .....

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ce tax would be chargeable on online information and database access or retrieval [OIDAR] services provided by any person located in non-taxable territory and received by Government, local authority, governmental authority, or an individual in relation to any purpose other than commerce, industry or any other business or profession [cross border B2C (business to consumer) OIDAR services provided in taxable territory]. Online information and database access or retrieval [OIDAR] services have been .....

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as the territory to which the Finance Act, 1994 applies i.e. the whole of territory of India other than the State of Jammu and Kashmir. India includes not only the land mass but its territorial waters, continental shelf, exclusive economic zone or any other maritime zone as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976; the sea-bed and the subsoil underlying the territorial waters; the air space above its territory and territori .....

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an individual in relation to any purpose other than commerce, industry or any other business or profession (located in the taxable territory in India) and the place of provision of such services as determined by the application of Place of Provision of Service Rules, 2012, is in the taxable territory in India. 3. Are all cross border B2C services provided in the taxable territory made taxable with effect from 1st December, 2016? No. Only cross border B2C OIDAR services provided in the taxable t .....

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the OIDAR services the same meaning as assigned to it in the clause (ccd) of sub-rule 1 of rule 2 of the Service Tax Rules, 1994 [inserted vide notification No. 48/2016-ST]. 5. What do we mean by Cross Border B2C OIDAR services provided in taxable territory in India? Cross border B2C OIDAR services means online information and database access or retrieval services provided by a person located in non-taxable territory to a non assesse online recipient in taxable territory in India. Non assesse on .....

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xable territory in India to a business entity be taxed under forward charge or reverse charge? No. The current dispensation of taxing cross border B2B services under reverse charge mechanism i.e. the recipient business entity pays service tax, continues. Cross border OIDAR services provided in taxable territory in India to a business entity will be taxed under reverse charge i.e. the business entity receiving the services will pay tax under reverse charge 7. Service recipient in taxable territor .....

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other business or profession Other than OIDAR Exempted Exempted Exempted Other than Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession All including OIDAR Taxable Reverse Charge Service recipient in taxable territory 8. What are the changes made in statutory/legal provisions and when are these coming into effect? Notification Nos. 46/2016-ST, 47/2016-ST, 48/2016-ST and 49/2016-ST ha .....

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ub-rule 1 of rule 2 of the Service Tax Rules, 1994 [inserted vide notification No. 48/2016-ST]. ii. to amend proviso of rule 3 of PoPSR so as to make the proviso inapplicable to OIDAR services. iii. to omit the clause (b) of rule 9 of PoPSR. 2. As a result, default rule 3 of PoPSR will be applicable in such cases from 1st December, 2016, whereby the place of provision of a service is the location of recipient of services i.e. cross border B2B/B2C OIDAR services received by a person located in ta .....

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vices provided by a person located in a non- taxable territory and received by Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession, will not be available for OIDAR services received by such persons w.e.f 1st December, 2016. OIDAR services have been assigned the same meaning as assigned to it in the clause (ccd) of sub-rule 1 of rule 2 of the Service Tax Rules, 1994 [inserted vide Not .....

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des electronic services such as,- i. advertising on the internet; ii. providing cloud services; iii. provision of e-books, movie, music, software and other intangibles via telecommunication networks or internet; iv. providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network; v. online supplies of digital content (movies, television shows, music, etc.); vi. digital data storage; and vii. online gaming. 12. Do OIDAR services include all se .....

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als iii. Services of lawyers and financial consultants who advise clients through email iv. Booking services or tickets to entertainment events, hotel accommodation or car hire v. Educational or professional courses, where the content is delivered by a teacher over the internet or an electronic network (in other words, using a remote link) vi. Offline physical repair services of computer equipment vii. Advertising services in newspapers, on posters and on television 14. What type of services wil .....

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on of the digital content is essentially automatic, and the small amount of manual process involved doesn t change the nature of the supply from an OIDAR service All electronic services that are provided in the ways outlined above are OIDAR services. 15. Examples of services whether or not OIDAR services Service Whether Provision of service mediated by information technology over the internet or an electronic network Wheter it is Automated and impossible to ensure in the absence of information t .....

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n digital form eg, photographs, reports, medical results Yes No No 16. Indicative List of OIDAR services Website supply, web-hosting, distance maintenance of programmes and equipment; (a) Website hosting and webpage hosting; (b) automated, online and distance maintenance of programmes; (c) remote systems administration; (d) online data warehousing where specific data is stored and retrieved electronically; (e) online supply of on-demand disc space. Supply of software and updating thereof; (a) Ac .....

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ng or downloading desktop themes; (b) accessing or downloading photographic or pictorial images or screensavers; (c) the digitised content of books and other electronic publications; (d) subscription to online newspapers and journals; (e) weblogs and website statistics; (f) online news, traffic information and weather reports; (g) online information generated automatically by software from specific data input by the customer, such as legal and financial data, (in particular such data as continua .....

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ther sounds; (c) accessing or downloading of films; (d) downloading of games on to computers and mobile phones; (e) accessing automated online games which are dependent on the Internet, or other similar electronic networks, where players are geographically remote from one another. (5) supply of distance teaching. (a) Automated distance teaching dependent on the Internet or similar electronic network to function and the supply of which requires limited or no human intervention, including virtual .....

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ction of service tax and remitting the same to the Government of India. However, the service provider in the non-taxable territory may appoint an agent in the taxable territory who will be person liable for paying service tax. 18. When will the liability to collect and discharge service tax for providing cross border B2C services in taxable territory, be on an intermediary/electronic platform and not on service provider in the non-taxable territory? When an intermediary located in the non-taxabl .....

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intermediary taking part in the provision clearly identifies the service in question, its provider in non-taxable territory and the service tax registration number of the provider in taxable territory; the intermediary involved in the provision does not authorise the charge to the customer or take part in its charge i.e. intermediary neither collects or processes payment in any manner nor is responsible for the payment between the non-assesse online recipient and the provider of such services; .....

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consumers and remit the tax to the Government. When the service provider in non-taxable territory is represented for any purpose in taxable territory by a person, then such person is deemed to be the person liable for paying service tax [notification No. 48/2016-ST refers]. 19. What is the aggregator model in the context of the cross-border provision of electronic services in the B2C context? If the electronic market place owner enables a potential customer to connect with persons providing ser .....

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ishes that he is merely an intermediary by satisfying the conditions as discussed at Sl. No. 18 above, the actual provider of OIDAR services in non-taxable territory shall be required to register and discharge service tax liability. If intermediary does not satisfy the said conditions, the intermediary will be deemed to be receiving and providing cross border OIDAR services in taxable territory and thus liable for collecting service tax from consumers in taxable territory and depositing with the .....

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OIDAR services/electronic services provider and the end consumer, each intermediary (such as a content aggregator) is deemed to have received and provided the said service provided the conditions discussed at Sl. No. 18 above are not satisfied. To give effect to the above, a proviso has been inserted in the Service Tax Rules in Rule 2 (1) (d) (ii) [notification No 48/2016-ST refers]. 22. Please give an example where the intermediary is the person liable to pay service tax. For example, a busine .....

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instances, the service may be supplied directly by the owner of the electronic content to the final consumer. For instance, an individual purchases a song directly from an independent artist via his or her website. Such owner shall be responsible for taking registration and payment of service tax. Other situations may involve transactions between multiple intermediaries. For instance, in the case of a ring tone, the content owner may enter into a licensing agreement with an aggregator of ring to .....

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lications was bought. Here, application store or platform shall be responsible for taking registration and collection of service tax from customers and payment of the same to the Government of India. 24. Who is considered as not taking part in providing the service of OIDAR services? In the following situations, taxable persons involved in the provision of service of online information and database access or retrieval services cannot be deemed as taking part in the said provision:- i. provider o .....

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t and/or processing the payment (in the same way that an internet provider makes the internet network available), that mobile operator should be treated in the same way and not as providing the said service of online information and database access or retrieval services. If, however, a mobile operator is involved in any way other than that described above (carrying of the content or processing of payment) his participation cannot be disregarded. In other words, his involvement in the provision o .....

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puts up such electronic service for supply, it must be seen as predominantly involved in the provision of that service and it should therefore be regarded as taking part in the supply. The fact that there is an additional intermediary taking part in that supply who is placed between the app store or portal and the final customer (e.g. a mobile operator), does not automatically change the situation of the app store or portal. 25. What would be the basis to determine whether a person is taking pa .....

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ail. This means that even though there is contract to the contrary but the intermediary involved in the supply authorises the charge to the customer or takes part in its charge i.e. intermediary collects or processes payment in any manner and is responsible for the payment between the non-assesse online recipient and the supplier of such services. Further, the intermediary involved in the supply does authorise delivery of online information and database access or retrieval services; 26. Whether .....

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th all service tax provisions on behalf of such service provider. 27. How can the service provider located in non-taxable territory providing cross border OIDAR services, identify that the service recipient is in taxable territory and whether the service recipient in taxable territory is non-assesse online recipient or not? Person receiving such services shall be deemed to be located in the taxable territory if any two of the following non-contradictory conditions are satisfied, namely :- the lo .....

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sed for payment is maintained is in the taxable territory; the country code of the subscriber identity module (SIM) card used by the service recipient is of taxable territory; the location of the service recipient s fixed land line through which the service is received by the person, is in taxable territory. Further, the person in the taxable territory receiving such services shall be deemed to be non-assesse online recipient if such person does not have a service tax registration in the taxable .....

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provided to non-assesse online recipient in taxable territory. 29. What is procedure of registration? First down load firefox software. Go to site https://www.aces.gov.in/ It will open home page for ACES. Click Service Tax . It will open login window. Click on new user to click here . Fill in the details such as user ID (which you want), name, mobile number, email etc. It will generate user ID and password, which shall be delivered on e-mail provided. Login again with login ID and password. Comp .....

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y such service provider in the country of incorporation. This details of this procedure would soon be available on cbec.gov.in. PAN (Permanent Account Number) is a ten-digit alphanumeric number allotted by Income Tax Department of Government of India. 31. Whether the application for registration and other documents would be required to be submitted in physical form? Documents, such as copy of certificate of registration/incorporation would be accepted in PDF format, which may be forwarded to the .....

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ttps://www.aces.gov.in/ . Such service providers would file ST-3C returns online as done by other service providers located in India electronically through internet banking on web site https://www.aces.gov.in/ .. 33. Whether threshold exemption of ₹ 10 lakhs should apply to such transactions? Service providers in non-taxable territory may seek registration under rule 4 of the Service Tax Rules, 1994 in form ST 1A, within 30 days from 1st December, 2016, if they crossed threshold of ₹ .....

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vider of taxable service from one or more premises, does not exceed ten lakh rupees in the preceding financial year. Cross border B2C services were taxable. However, such services when provided by a person in non-taxable territory to non-assesse online recipient were exempted. If total turnover of such services crossed ₹ 10 lakh in previous year, the small exemption benefit would not be admissible. 35. Most of the online services are branded services. Whether small scale exemption would be .....

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used for the purpose of indicating, or so as to indicate a connection, in the course of trade, between a service and some person using the name or mark with or without any indication of the identity of that person.] 36. How would the service provider in non-taxable territory compute the value of his/her turnover in Indian rupees? The value of taxable service would be calculated on the basis of the rate of exchange, which shall be the applicable rate of exchange as per the generally accepted acco .....

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border service necessarily has to be an Indian resident for the service tax liability to arise? No. It is not necessary for the service recipient to be an Indian resident for the service tax liability to arise. The person in taxable territory receiving such services should satisfy any two of the non-contradictory conditions specified in Sl. No. 27 above. 39. What are the requirements of record keeping? The data to be recorded would be limited to what is required to satisfy that the tax for each .....

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ces provided or agreed to be provided in taxable territory by a person located in the non-taxable territory, an invoice, a bill or, as the case may be, challan shall include any document, by whatever name called, whether or not serially numbered, but containing name and address of the person receiving taxable service to the extent available and other information in such documents as required under sub-rule (1) of rule 4A of the Service Tax Rules, 1994. [notification No.48/2016-ST refers] 41. Whe .....

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day of the following month in which service was provided. Duty may be deposited electronically through internet banking on web site https://www.aces.gov.in/ . 42. What evidence would the service provider have that he/she has paid his/her tax? The service provider is required to visit the website https://www.aces.gov.in/ for paying his/her tax. She would be required to opt for e-payment. As on date e-payment facility is available with respect to Indian banks only. On electronic payment of service .....

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the taxable territory shall be the person liable for paying service tax [notification No.48/2016-ST refers]. 44. How many returns are required to be filed and what is the frequency of returns? The taxable person shall submit a half-yearly return in Form ST-3C electronically for the months covered in the half-yearly return by the 25th of the month following the particular half-year. 45. In case of doubt who should you correspond with? Any issues or doubts which may arise or any omission/error obs .....

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