Synopsis: The Hon’ble AAR, Karnataka in the matter of M/s Springer Nature Customer Service Centre GmbH has held that GST will be leviable on OIDAR services made to ‘unregistered persons’ in taxable territory for purposes other than commerce, industry, business or profession. However, states that Applicant is not required to charge GST on the said services supplied to Government, Local Authority, Governmental Authority and an individual, if they are registered persons.
M/s Springer Nature Customer Service Centre GmbH (“the Applicant”) is a registered service provider of OIDAR services under GST. The Applicant is a publisher of scientific, technical and medical content which is accessed by several persons (registered/unregistered, Government/Non-Government, individuals/corporates) in India and undisputedly these services are in the nature of OIDAR.
The ultimate end-user of applicant’s books and journals inter-alia are scientists, researchers, academicians, professionals and students.
- Whether the Applicant is required to charge GST on supply of OIDAR services to “only” unregistered persons in India or to Government, Local Authority, Governmental Authority and an individual also irrespective of their GST registration status?
- If any service recipient is using Applicant’s OIDAR services for commerce, industry or any other business or profession in India, whether the Applicant will be required to charge GST?
- If response to above (b) is in affirmative, how should Applicant determine that its OIDAR services shall be used by the recipient for any purpose other than commerce, industry or any other business or profession, located in India? As the majority of content in books, journals, etc. supplied by the Applicant is used / capable of use by way of reference by professional end-users, i.e. scientists, doctors, engineers, researchers, academicians, etc. can it be taken to imply that applicant’s OIDAR services are used by recipients in India for purposes of commerce, industry, business or profession?
- In case the response to (b) above is in affirmative, whether purpose is required to be determined in case of Government, local authority, Governmental authority and an individual?
- Whether it is adequate for the applicant to obtain written confirmation from recipient of its OIDAR services in order to:
- Determine their respective category in terms of Section 2(16) of the Integrated Goods and Services Tax Act, 2017 (“IGST Act”) i.e. whether the customer is covered in the category of Government, Local Authority, Governmental Authority, etc.
- Accept recipient’s claim to exemption under GST Law, eg. exemption allowed to eligible educational institutions from GST on procurement of electronic journals/ periodicals in terms of Notification No. 2/2018- Central Tax (Rate) dated January 25, 2018.
The Hon’ble AAR, Karnataka vide Advance Ruling No. KAR ADRG 70/ 2019 dated September 23, 2019 has held as under:
- Section 2(16) of the IGST Act makes it clear that a government, local authority, governmental authority, an individual or any other person, who is not registered, if satisfies the condition- “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”, are covered under the definition of “non-taxable online recipient”.
- In respect of registration, Section 24(xi) of the Central Goods and Services Tax Act, 2017 (“CGST Act”) makes it very clear that a person supplying OIDAR services from a place outside India to a person in India, other than a registered person, shall register compulsorily irrespective of the turnover of such supplies. It is only related to registration of the supplier.
- The charge of tax on the supply of OIDAR services to a non-taxable online recipient would be on the service provider. In case of supply of any service by a person located in a non-taxable territory to any person other than non-taxable online recipient, the liability to pay tax rests on the person located in the taxable territory under reverse charge basis under Notification No. 10/2017-Central Tax (Rate) dated June 28, 2017 and such person is liable for registration compulsorily under Section 24(iii) of the CGST Act.
- The burden of proving that an unregistered person located in the taxable territory has received OIDAR services for the purposes other than for business, commerce, industry or profession lies on the Applicant.
Section 2(16) of the IGST Act:
“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 per cent. or more participation by way of equity or control, to carry out any function entrusted to a Panchayat under article 243G or to a municipality under article 243W of the Constitution;”
Section 24(xi) of the CGST Act:
“Compulsory registration in certain cases.
- Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,––
(xi) every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person; and”