Gaming Portal, Education and Fintech getting GST notice
Education, gambling, and finance platforms whose services are used here are receiving informative emails. 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 off shore firms of nasty surprises later Anemall, in the nature of an information flyer, is being sent to these off shore business-to-customer (B2C) entities by the Bengaluru nodal office of Central Board of Indirect Taxes and Customs, which administers the common indirect tax that came into effect from July 1, 2017.
Several companies whose platforms are being used by Indian residents for entertainment, trading as well as educational purposes have so far received the communiqué from the tax office. While the Indian revenue is educating foreign online service providers on the mandated compliances, it is equally important to incentivise these foreign corporations to carry out compliances-providing amnesty for the past taxes along with interest and penalties would go a long way in enabling these corporations to commence compliances in India.
Two years ago some of the overseas companies who were unaware of India’s new tax, were put off by notices from the tax department. While many foreign companies complied 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.
Unlike the 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. A 15% penalty can be imposed by the tax office if it believes that the GST was “intentionally avoided”. Some of the companies forked out the penalty-as the amounts were not significant enough to initiate litigation – but they were upset for having been categorised as ‘tax evaders’ because home country regulations could require them in future to disclose the information in some of the regulatory filings. The services targeted by the GST office come under the category of Online Information Database Access and Retrieval (OIDAR) services, which are sold over the internet and received by recipients online without having any physical interface with the supplier of such services. As per this definition, GST is applicable on automated services involving minimum human intervention. Under the circumstances, services in the form of a recorded educational video or gaming platform or even an offshore