Some foreign digital subscription platforms, including news outlets and streaming companies, are gearing up for a legal battle against India's tax authorities over retrospective goods and services tax (GST) demands.

The dispute centres around alleged tax evasion for online services such as advertising, news subscriptions, music and movie streaming, and online gaming that fall under the Online Information and Database Access or Retrieval (OIDAR) category, which attracts the 18 percent tax slab.

As a result of the government's decision to remove OIDAR exemptions in October 2023, companies are now facing tax demands for services provided between 2017 and October 2023. These companies plan to contest the notices in their respective jurisdictions, a person familiar with the development said, requesting anonymity.

“The companies will file soon in (the respective) high court,” the person said, arguing that services such as online training and exams do not fit the OIDAR definition.

GST notices were sent out to about 70 foreign companies in 2023 and 2024 across sectors such as subscription-based services, edtech, online gaming and advertising, as tax authorities seek to enforce the 18 percent Integrated GST (IGST) on digital services. Even global digital giants, including Meta (Facebook), Alphabet (Google), Netflix and Spotify reportedly received GST notices in 2023 under the scope of OIDAR. The notices demand payment of hundreds of crores as a result of the 18 percent GST being levied, the person cited above said.

“OIDAR is something GST authorities are going to be very focused on. According to the law, when foreign firms are providing services in India, they are supposed to register in India and pay GST. That has not happened,” the person said. The individual added that a special commissionerate in Bengaluru has been set up to handle OIDAR compliance, with show-cause notices already issued.

The controversy has arisen as companies have argued that their services involve human intervention and can be delivered offline as well, which, prior to the October 2023 amendment, could have exempted them from GST. The law was modified to broaden the definition of OIDAR services, eliminating references to “minimal human intervention” and expanding the tax's scope, with the revised rules now applying whether there is human intervention or not.

Source: Money Control