Service tax has been imposed on import of Online Information and Database Access and Retrieval (OIDAR) services with effect from Dec 1, 2016.
Till November 30, 2016 services received by businesses in India from abroad were taxable under reverse charges which meant that a business service recipient in India was required to pay service tax on Import of Services. B2C import of services was exempt from this tax.
However, from December 1, 2016, all OIDAR B2B services received in India from abroad shall attract levy of service tax under reverse charge on the importer of services in India. According to an official statement, Indian Companies shall not get an exemption on payment of service tax on import of online information, database access and retrieval services.
This move will increase the cost for individuals and will add compliance for ecommerce and technology companies, especially startups.
When it comes to B2C, for the supply of OIDAR service from service provider outside India to an Indian non-business individual or government, the overseas entity shall have to charge Service Tax under ‘Forward Charge’.
Not only this, the overseas entity has to make service tax payments and file service tax returns in the prescribed time, manner and form. The rate of service tax shall be 15% (14% Service Tax plus 0.5% SBC plus 0.5% KKC).
This move has been taken to bring the Foreign Service providers at par with the domestic service providers, who are otherwise required to charge and pay service tax. Furthermore, it aims to bring more uniformity for smoother GST implementation which is underway at the moment.
This development was reported by TaxMantra.com