The Goods and Services Tax (GST) authorities have sent notices to around 70 digital companies, including advertising firms, edtech, and online gaming firms, in line with the requirements for 18 per cent Integrated GST (IGST), including foreign companies such as Facebook, Google, Netflix, and Spotify, to ensure compliance with new GST regulations.
New GST rules
The new GST rules for all foreign subscription-based service providers to Indian consumers, effective from October 1, require them to undergo a simplified registration process under the GST law, either directly or through representatives in India, to ensure tax compliance. Overseas Online Information Database Access and Retrieval (OIDAR) service providers outside of Indian jurisdiction have to pay an 18 percent IGST on a forward charge basis. In this case, the service provider is responsible for collecting tax from the recipient and remitting it to the government.
OIDAR services include advertising, cloud services, e-books, movies, music, software, data and information retrieval services, data storage, and online gaming services delivered online and on internet platforms.
“Foreign OIDAR service providers, including over-the-top platforms and social media companies, derive significant revenue from Indian subscribers. Online education services, gaming, and advertising, which were earlier outside the scope of OIDAR services, now fall under the amended definition for GST,” said a senior tax official.
GST officials suspect that many online gaming and advertising firms, along with smaller subscription-based players, are among the significant defaulters.
The government expects to collect around ₹2,000 crore in the current financial year (FY2023-24), up from the approximately ₹700 crore collected in the previous financial year (FY2022-23), from foreign firms providing various digital services in India.
