Indian tax authorities are alerting overseas gaming, fintech and content service 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, a report on Economic Times said.
An email, in the nature of an information flyer, is being sent to these offshore business-to-customer (B2C) entities by the Bangalore nodal office of the Central Board of Indirect Taxes and Customs which administers the GST under the central government.
The IGST Act defines Online Information Data Base Access and Retrieval (OIDAR) to mean services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involves minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services and includes online gaming. When the supply is to the individual consumers i.e., B2C, the offshore suppliers are liable for paying integrated tax. Unlike the Rs 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.
Several companies whose platforms are being used by Indian residents for entertainment, trading as well as educational purposes have so far received the communique from the tax office.
In related news, the GST Council in May 2021 has constituted a minister group (GoM) to study whether or not any change in authorized provisions is required for the valuation of companies supplied by online gaming, racecourses and casinos which is yet to submit its report.
While many foreign companies complied with earlier notices 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 governments, as the local tax department does not have the jurisdiction,” said a lawyer specialising in taxation of digital services to ET.
A 15% penalty can be imposed by the tax department if it believes that the GST was “intentionally avoided”.