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Withdrawal of Service tax exemption on cross border B2C online information and database access or retrieval services w.e.f. December 1 2016

Service Tax - By: - Bimal jain - Dated:- 14-11-2016 - Dear Professional Colleague, At present, the services received in taxable territory from outside the taxable territory 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 are exempted [cross border B2C (business to consumer) services provided in taxable territory] vide Entry No. 34(a) of the Mega Exemption Notification No. 25/2 .....

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services, the place of supply is location of service provider and thus such cross border B2B/B2C services provided by a person in non-taxable territory and received by a person in taxable territory are outside the levy of Service tax. Now, with a view to provide a level playing field to Indian service providers providing taxable OIDAR services including electronic services in India, the exemption to such services provided in India by service providers located in foreign territory is being withdr .....

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ntal Authority, or an individual in relation to any purpose other than commerce, industry or any other business or profession [cross border B2C OIDAR services provided in taxable territory]. OIDAR services have been re-defined in Service Tax Rules, 1994 ( the Service Tax Rules ) to include electronic services. Corresponding changes has also been made in the POP Rules, the Mega Exemption Notification and Reverse Charge Notification No. 30/2012-ST dated June 20, 2012 ( the Reverse Charge Notificat .....

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taxable territory The Central Government vide Notification No. 46/2016-ST dated November 9, 2016 has amended the POP Rules in the following manner: Amendment in Rule 2: Rule 2(l) of the POP Rules has been amended to assign OIDAR services the same meaning as assigned to it in clause (ccd) of Rule 2(1) of the Service Tax Rules, which is being inserted by another Notification No. 48/2016-ST dated November 9, 2016. Amendment in Rule 3: Presently, proviso to Rule 3 of the POP Rules (Default Rule) pr .....

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vailable in the ordinary course of business, the place of provision shall be the location of the provider of service. Amendment in Rule 9: As per Rule 9 of the POP Rules, place of provision of following services shall be the location of the service provider: (a) Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders; (b) OIDAR services; (c) Intermediary services; (d) Service consisting of hiring of means of transport, upto a per .....

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e territory to consumers in taxable territory The Central Government vide Notification No. 47/2016-ST dated November 9, 2016, has amended the Mega Exemption Notification in the following manner: Proviso added to Entry No. 34: to provide that the existing exemption (vide Entry No. 34(a) of Mega Exemption Notification) to services 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 purp .....

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ww.cbec.gov.in/resources//htdocs-servicetax/st-notifications/st-notifications-2016/st47-2016.pdf Amendment in the Service Tax Rules: Person located in non-taxable territory providing OIDAR services to non-assesse online recipient is liable to pay Service tax and the procedure for payment of Service tax The Central Government vide Notification No. 48/2016-Service Tax dated November 9, 2016 had made Service Tax (Fourth Amendment) Rules, 2016 to amend the Service Tax Rules, effective from December .....

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meaning of Governmental Authority for this clause has also been provided, which is same as existing in Clause 2(s) of the Mega Exemption Notification. Insertion of clause (ccd) after clause (ccc) in Rule 2(1), providing definition of OIDAR services, as follows: (ccd) online information and database access or retrieval services means services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially aut .....

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t (movies, television shows, music, etc.); (vi) digital data storage; and (vii) online gaming; Amendment in Rule 2(1)(d)(i)(G): As per Rule 2(1)(d)(i)(G) of the Service Tax Rules, person liable for paying Service tax, in relation to any taxable service provided or agreed to be provided by any person which is located in a non-taxable territory and received by any person located in the taxable territory, shall be the recipient of such service. Now, the stated Rule has been amended to exclude OIDAR .....

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1)(d)(i)(H) has been inserted to provide that in relation to services provided or agreed to be provided by way of OIDAR, by any person located in a non-taxable territory and received by any person in the taxable territory other than non- assesse online recipient, recipient of such service, shall be the person liable to pay Service tax. Insertion of provisos in sub-clause (ii) dealing with various details of OIDAR services provided or agreed to be provided by any person located in a non-taxable t .....

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fied conditions. 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. If the service provider in non-taxable territory does not have a physical presence or does not have a representative for any purpose in the taxable territory, the service provider may appoint a person in the taxable territory for the purpose of paying Service tax and such person shall be lia .....

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n case of OIDAR services provided or agreed to be provided in taxable territory by a person located in the non-taxable territory. Amendment in Rule 7(1): Return form ST-3C has been inserted. Following forms has been inserted: FORM ST- 1A : Application form for registration under Section 69 of the Finance Act, 1994 ( the Finance Act ) for person in non-taxable territory providing OIDAR services in India. FORM ST- 2A : Certificate of registration under Section 69 of the Finance Act. FORM-ST-3C : R .....

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016-ST dated November 9, 2016, has made corresponding amendments in the Reverse Charge Notification so as to incorporate liability of Service tax payment and procedure thereunder on to the service provider located in the non-taxable territory with respect to OIDAR services provided in the taxable territory to non-assesse online recipient . To access complete Notification, please click on the link below: www.cbec.gov.in/htdocs-servicetax/st-notifications/st-notifications-2016/st49-2016.pdf In vie .....

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all the stakeholders. Some of important issues covered are as follows- Meaning of OIDAR Services Meaning of Cross Border B2C OIDAR services provided in taxable territory in India Changes made in statutory/legal provisions and date from when these are coming into effect Changes made in the POP Rules and its implications Services that would not be considered as OIDAR services Type of services that would be covered under OIDAR services Clarification on who shall be liable to collect and discharge .....

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by a foreign service provider to a person in India will become taxable from December 1, 2016 onwards, which includes webpage hosting, online maintenance of programmes, remote systems administration, data warehousing, cloud storage and downloading of games, music, distance teaching, and supply of images, text and information and making available of databases, etc. Further, an online mechanism of taking registration has been prescribed and registration will be deemed to be granted online on submis .....

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