Google, Facebook, X, Edtech Cos likely to pay up to 18% IGST from October 1, 2023

Companies such as Google, Facebook, and X (formerly Twitter), along with some edtech firms, could be subject to an Integrated Goods and Services Tax (IGST) of up to 18 per cent on services provided to the government and individuals in India, effective from October 1, 2023.

This development follows a notification issued by the Central Board of Indirect Taxes and Customs, stating that these services will no longer enjoy an exemption from IGST, according to a report in The Economic Times.

A senior official commented, “This will cover overseas companies providing advertising, cloud services, music, subscription-based services, online education, and even information to all individuals and government, regardless of whether the services are used for personal or business purposes.”

Previously, services from Online Information Database Access and Retrieval (OIDAR) providers located in non-taxable territories and received by the central government, state government, government authorities, or individuals for purposes other than business were exempt from taxation. Taxes were applicable only to business-to-business (B2B) services.

One expert noted, “This amendment specifies that the said exemption entry will no longer apply to OIDAR services starting from October 1, 2023. Consequently, OIDAR services provided to the aforementioned persons are now liable to taxation.”

OIDAR services, delivered via information technology over the internet, are automated and involve minimal human intervention. Such services encompass advertising on the internet, cloud services, sale of e-books, films, music, and software, digital content supply, data storage, and online gaming.

The official further clarified that the notification would eliminate any ambiguity resulting from the amendment introduced in the Finance Act 2023, as individuals and government entities were previously exempt.

Experts have, however, pointed out that this move could heighten compliance requirements for smaller companies and adversely affect many edtech and subscription based service providers.