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Submitted by-Roopali Singhal

With world’s largest youth population and usage of mobile device made, India as one of the world’s leading potential markets in Gaming Sector. Currently valued at USD 890 million, the Indian Gaming Industry is estimated for the annual growth rate of 14.3 per cent with mobile Gaming taking the lead at 71% share1.

Most of the online gaming are occurred on international portals with B2C characteristics. The service tax was not possible to levy on them as Indian service users are not registered taxpayers, thus reverse charge mechanism of taxation was practically not possible and foreign service providers were out of net of Indian taxation system. Non-taxation of foreign gaming portals or apps business was giving them undue advantage over the domestic person engaged in the similar business. To remove this anomalies Government tried them to bring them into the net2. In the month of November, 2016, Government bring a notification to tax such foreign entities and put them under 15% of tax bracket and put online gaming into “Online information and database access or retrieval Services” commonly known as OIDAR Services.

[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 dated 9/11/2016]3.

The GST reform also provided a suitable provision to deal with OIDAR Services. The transactions related with online gaming are extremely dynamic and frequent cross border transactions makes it more complicated. It was felt that the general provisions of taxation will not alone sufficient to deal with complexity of its business. Therefore a separate set of provisions were promulgated in Service tax laws and now in CGST and IGST Acts3.

The provisions under the GST laws are primarily dealing with:

  1. Classify online gaming activities as an OIDAR transactions;
  2. Place of supply;
  3. Time of supply;
  4. Person liable to pay GST;
  5. Registration of online gaming portals/service provider
  6. Returns filed by Overseas online gaming Service provider

1.Determination of OIDAR transactions

To tax a transaction it is essential to understand, whether anonline gaming service is OIDAR or not, the Act provides definition. Further, the clarifications made under Service Tax is very important for determination, as the definition of OIDAR provided under the Section 2(17) of IGST Act, 2017 is identical with what it was given under rule 2(1)(ccd) of Service Tax Rules.

1.1 Definition of OIDAR services: Section 2(17) of IGST Act, 2017

As the cross border transaction are governed by “Integrated Goods and Services Tax Act, 2017, the provision related to cross border Online Gaming Services given under IGST Act.

Online gaming is nowhere defined under the Act, however Online gaming activities are included under the definition of OIDAR Services.

“OIDAR 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 automated and involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services such as,––

(i) advertising on the internet;
(ii) providing cloud services;
(iii) provision of e-books, movie, music, software and other intangiblesthrough telecommunication networks or internet;
(iv) providing data or information, retrievable or otherwise, to any personin electronic form through a computer network;
(v) online supplies of digital content (movies, television shows, musicand the like);
(vi) digital data storage; and
(vii) online gaming;

2.Place of Supply shall be the location of recipient:

The place of supply decided the taxability of the person.  Section 13(12) provides with the ‘place of supply’ in respect of online information and database access of retrieval services as below:

The place of supply of gaming services provided shall be the location of the recipient of services.

Where the gaming services provided by a domestic portal, the place of supply will be important to determine whether the service is intra-state or interstate, if such service is provided by a overseas organisation, it will be Inter-state transaction.

Conditions for deemed taxable territory:

Section 2(109) “taxable territory” means the territory to which the provisions of this Act apply;

Explanation to the Section 13(12) provides a test of OIDAR received in taxable territory or not as below:

A person receiving OIDAR servicesshall be deemed to be located in the taxable territory, if any two (02)out of seven (07) of the following non-contradictoryconditions are satisfied, namely:––

(a) the location of address presented by the recipient of services through internetis in the taxable territory;
(b) the credit card or debit card or store value card or charge card or smart cardor any other card by which the recipient of services settles payment has been issuedin the taxable territory;
(c) the billing address of the recipient of services is in the taxable territory;
(d) the internet protocol address of the device used by the recipient of servicesis in the taxable territory;
(e) the bank of the recipient of services in which the account used for paymentis maintained is in the taxable territory;
(f) the country code of the subscriber identity module card used by the recipientof services is of taxable territory;
(g) the location of the fixed land line through which the service is received bythe recipient is in the taxable territory.

3. Time of supply of OIDA services

Supply made to the taxable person

The time of supply of services shall be the earliest of the following dates, namely:—

(a) If Invoice issued within thirty days: the date of issue of invoice by the supplier, or the date of receipt of payment, whichever is earlier; or
(b) If the invoice not issued within thirty days: the date of provision of service, or the date of receipt of payment, whichever is earlier;

Supply made to the non-taxable person

In such cases the tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:––

(a) The date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or
(b) The date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

In case of supply by associated enterprises, where the supplier of service is located outside India: date of accounting made by recipient or date of payment made whichever is earlier.

4. Person liable to Pay GST

4.1 By Registered person

Reverse charge if OIDAR service received by person registeredunder GST in India, such will be liable to pay CGST and SGST / IGST under reverse charge mechanism.

4.1 By Supplier/Intermediary where OIDAR Services provided from non-taxable territory to a non-registered person

Section 14 provides as under

1. Under the following circumstances the liability to pay IGST on such supply of ODIAR services shall be on the Supplier of services.
a. Byany person located in a non-taxable territory; and
b. Received by a non-taxable online recipient:

Intermediaryis liable to pay IGST

Sometimes OIDAR products are not owned or belong the portal or app where it is available for sell but such intermediaries are facilitatingentire transaction on purchase of such software/music or other OIDAR products.
For example McAfee is available for sale on a web portal which does not belong to McAfee or certain music file available on Apple store or A Cloud space is purchase from one site while the space management of such cloud is being done by another person. 
To deal with these situations Section 14 of IGST Act, provides certain guidelines which fix the liabilities of payment of GST under the abovesaid situations.
An Intermediaryis liable to pay IGST if the OIDAR services facilitated by the intermediaries located in a non-taxable territory and received by a non-taxable online recipient in general, however under the following circumstances an Intermediary will not liable to pay tax.

(a) the invoice etc. issued by suchintermediary clearly identifies the service in question and itssupplier in non-taxable territory;
(b) the intermediary neither collects/processes payment nor is responsible for the payment between thenon-taxable online recipient and the supplier of such services;
(c) the intermediary does not authorise delivery; and
(d) the general terms and conditions of the supply are not set by the intermediarybut by the supplier of services.

Non-taxable online recipient:

Section 2(16) : “non-taxable online recipient” means any Government, local authority, governmental authority, an individual or any other person not registered and 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.

Explanation.––For the purposes of this clause, the expression “governmental authority” means an authority or a board or any other body,––

(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government, with ninety percent or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution;

6. Registration of OIDAR Service provider

Section 24 of CGST Act, deals with registration provides that every person supplying online information and data base access or retrieval services from a place outside India to a person in India.

Simplified registration scheme

Section 14(2) provides that the supplier of OIDAR services shall, for payment of integrated tax, take a single registration under the Simplified Registration Scheme to be notified by the Government.  The Government is to give notification in this regard.

Any person located in the taxable territory representing such supplier for any purpose in the taxable territory shall get registered and pay integrated tax on behalf of the supplier.

If such supplier does not have a physical presence or does not have a representative for any purpose in the taxable territory, he may appoint a person in the taxable territory for the purpose of paying integrated tax and such person shall be liable for payment of such tax.

Form for registration of Overseas OIDAR Service provider

For obtaining registration by a person supplying OIDAR services from a place outside India to a non-taxable online recipient. A new separate registration form in FORM GST REG-09A would be required to be submitted by any person providing OIDAR services from a place outside India.

6. Returns to be filed by overseas OIDAR Service Provider:

Rule 5A. Form and manner of submission of return by persons providing online information and database access or retrieval services

Every registered person providing online information and data base access or retrieval services from a place outside India to a person in India other than a registered person shall file return in FORM GSTR-5A on or before the twentieth day of the month succeeding the calendar month or part thereof.