Taxman filling in overseas online services providers on GST applicability

Indian tax authorities are alerting overseas gaming, fintech and content services providers in distant jurisdictions like the Us, Malta, and curacao about the goods and services tax(GST) law to spare these offshore firms of nasty surprises later.

An email, in the nature of an information flyer, is beings sent to these offshore business-to customer(B2C) entities by the Bengaluru nodal office of central Boards of Indirect taxes and customer which administers the common indirect tax which came into effect on july 1,2017.                     Several companies whose plat forms are being used by Indian residents for entertainment, trading as well as educational purposes have so far received the communique from the tax office.                                                                          While the Indian revenue is educating foreign online services providers on the mandated compliances, it is equally important to incentivize these foreign corporations to carry out compliances providingamnesty for the past taxes along with interest and penalties would go a long way in enabling these corporations to commence compliances in India,” said Uday pimprikar, national leader , indirect tax, Ey.                                                                                                         

 Two years ago, some of the over- seas companies who were put off by notices from the tax department. While many foreign companies complied and paid the tax to close the matter, some of them had then questioned the practice of serving notices or summons via emails,” The overseas entities were of the impression that such communications, in accordance with international law must be routed through their respective go varmints, as the local tax department does not have the jurisdiction,” said a lawyers specializing in taxation of digital services. Unlike the 20 lakh threshold for levy of GST on domestic entities, the tax is applicable on various cross-border services irrespective of any cut- off amount. A 15% penalty can be imposed by the tax office if it believes that the GST was “ intentionally avoided “some of the companies forked out the penalty as the amounts were not significant enough to initiate litigation but they were upset for having been categorized as “ tax evaders’ because home country regulations could require them in future to disclose the information in some of the regulatory filings the services targeted by the GST office come under the category of online information database Access and Retrieval (OIDAR) Services which are sold over the internet and received by recipients online  without having any physical interface with the supplier of such services AS per this definition GST is applicable on automated services involving minimum human intervention Under the circumstances, services a recorded educational video or gaming platform or even an offshore cryptocurrency trading platform could attract GST. But it cannot be imposed on a lived classroom session held by an overseas university. Thus emails have so far been sent to foreign B2C players. If services are bought by registered business entities in India, then the recipient of the services is liable for payment of GST as OIDAR services are under the list of ‘Reverse charge services’ rules of GST. While under GST, goods or services are taxed at the place of consumption, reverse charge means that the liability to pay tax is on the recipient of supply of goods or services instead of the supplier for notified categories of supply.

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