Google, Facebook, X likely to pay 18% IGST

Companies like Google, Facebook, and X might have to dish out an integrated GST up to 18 per cent on the services they provide to governmental institutions and individuals within the country, a government notification has revealed.

"This will cover overseas companies providing advertising, cloud services, music, subscriptions based service, online education and even information to all individuals and government irrespective of whether it is used for personal or business purpose," an official in the know has told Economic Times.

The services these companies provide is called Overseas Online Information and Databases Access Retrieval Services or OIDAR services.

The Central Board of Indirect Taxes and Customs notification says that the services will no longer get an exemption on integrated goods and services tax (IGST).

Earlier, only B2B servies provided by these companies were taxed.

"This amendment specifies that the said exemption entry will no longer be applicable to OIDAR services starting from October 1, 2023. Consequently, OIDAR services provided to the aforementioned persons are now liable to taxation," EY India partner Saurabh Agarwal told the organisation.

The law defines OIDAR services as those delivered with "minimal human intervention" through information technology over the Internet.

Things like e-books, cloud services, online books, software, or movies are likely to fall under its purview.

OIDAR services' tax scope was widened by the central government in its Finance Act of 2023.

"Due to removal of the term 'involving minimal human intervention,' even services which may have human intervention may get covered when provided by an overseas platform," a partner at PWC told the publication.

On the other hand, the government has exempted payments made for goods imported through ocean freight from 5 per cent integrated GST with effect from October 1.

Currently, importers are required to pay 5 per cent GST under the Reverse Charge Mechanism.

KPMG Indirect Tax Head & Partner Abhishek Jain said the amendments proposed are aligned with the apex court's ruling in the case of Mohit Minerals and help explicitly mention the government's alignment to the position.

"While this has been issued prospectively, the industry has been seeking and successfully claiming refund of taxes already paid for the past period, where credit has not been availed," Jain added.

With inputs from PTI