Supreme Court Calls for Review of GST on Foreign OIDAR Services
The issue of GST on foreign OIDAR services (Online Information and Database Access or Retrieval services) has once again drawn judicial attention. In a significant observation, the Supreme Court recently noted that proper tracking and enforcement of GST compliance by overseas digital service providers is lacking — and recommended that the GST Council examine the issue.
This comes at a time when Indian regulators are tightening digital economy taxation, and the compliance gap from offshore players remains a concern.
What Are OIDAR Services?
OIDAR services refer to any digital service delivered over the internet without significant human intervention. These include:
- Streaming platforms (e.g., Netflix, Spotify)
- Cloud storage (e.g., Google Drive)
- Software-as-a-Service (e.g., Adobe, Zoom)
- Online advertisements, e-books, digital downloads
Why Is GST Applicable on Foreign OIDAR Services?
As per Section 14 of the IGST Act, GST is levied on cross-border OIDAR services supplied to Indian residents (non-taxable online recipients).
Key compliance provisions:
- Foreign service providers must register under GST in India (Section 24 of CGST Act)
- Must collect and pay IGST on B2C supplies
- Indian recipients are not liable under RCM for these B2C services
Supreme Court Observation: What Happened?
In a recent matter, the Supreme Court refused to entertain a PIL seeking a directive to initiate action against foreign OIDAR service providers allegedly not paying GST.
Instead, the Court made two key points:
- GST Council is the right forum to assess and take action on this issue
- Enforcement and tracking mechanisms for foreign suppliers are inadequate
While the Court did not intervene, it nudged the executive to plug this compliance gap via policy changes.
Legal Insight: The Supreme Court’s direction highlights the constitutional role of the GST Council under Article 279A. Tax policy and enforcement coordination, especially across jurisdictions, fall within its domain.
Challenges in GST Enforcement on OIDAR Services
| Issue | Explanation |
|---|---|
| No physical presence | Foreign companies often lack offices in India, making enforcement difficult |
| Limited tracking | Authorities have no direct access to user-level purchase data |
| Voluntary registration model | Enforcement is based on trust and registration by overseas suppliers |
| Platform-based sales | Services offered via app stores or intermediaries, blurring the tax liability chain |
CBDT vs CBIC: The Digital Divide
While the CBDT has implemented Equalisation Levy to tax digital ad revenues of non-resident firms like Google and Facebook, the CBIC’s framework under GST still relies on self-registration by foreign OIDAR providers.
This dual approach often creates confusion and loopholes in compliance.
Expert View: What Can Be Done?
Tax tech advisor’s take:
“The GSTN must enable a centralised portal or alert mechanism for tracking foreign OIDAR payments, linked to credit card transactions or app store purchases. A data-sharing framework with RBI or payment gateways is essential.”
GST on Foreign OIDAR Services: Compliance Snapshot
| Particulars | Details |
|---|---|
| Law applicable | Section 14, IGST Act |
| Tax Rate | 18% IGST (usually) |
| Liable Party | Foreign OIDAR supplier |
| Indian user liable? | No, if B2C |
| Registration required? | Yes (for foreign supplier) |
| Return Filing | Monthly GSTR-5A |
Will the GST Council Act Now?
Given the Supreme Court’s signal, the onus now lies on the GST Council to:
- Recommend tighter enforcement protocols
- Suggest penal provisions for non-compliant foreign suppliers
- Enhance GSTN and RBI integration for cross-border digital tracking
FAQs on GST and Foreign OIDAR Services
Q1. Is GST applicable on Netflix or Spotify subscriptions?
Yes, these are OIDAR services. Foreign suppliers like Netflix must pay IGST in India.
Q2. Who is responsible to pay GST in such cases — customer or provider?
The foreign provider is responsible, not the customer (if B2C).
Q3. What if the foreign company doesn’t register in India?
In such cases, revenue leakage occurs. But there is no clear penal provision or enforcement mechanism yet.
Q4. Does the GST Act mention OIDAR services?
Yes. Section 2(17) of the IGST Act defines OIDAR. Section 14 details taxability.
Final Take: Strengthen Monitoring Before It’s Too Late
As India’s digital economy grows, taxation must keep pace. The Supreme Court’s call for a review is a timely reminder for policymakers to build a more robust, tech-driven compliance framework for foreign OIDAR services.
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Summary
Supreme Court flags weak enforcement of GST on foreign OIDAR services like Netflix and Google. It urges the GST Council to plug compliance gaps and boost tracking of cross-border digital transactions. A policy update may soon follow.