Recently, Central Government has brought changes in the Taxability, Place of Provision and Procedural compliances in respect of “Online Information and Database Access or Retrieval Service” with the intent to broaden the Service tax net by 1st December 2016.

For this purpose, the Place of Provision of given service has been shifted from Rule 9 of the Place of Provision Service i.e. location of service provider to Rule 3 i.e. location of the service recipient in cases where Service provider is located outside India. Now, by virtue of this change the service shall be deemed to be provided at the location of the service recipient and the service recipient shall be responsible for the payment of service tax under reverse charge mechanism instead of service provider located outside India.

Moreover, to broaden the service tax bracket, the government has lifted the exemption available to the specified person i.e. Government, a local authority, a government authority or an individual in relation to any purpose other than commerce, industry or any other business or profession in respect of given service received from service provider located in the non-taxable territory. Now, in case the given service provided to the specified person will be taxable however the person liable to pay tax shall be determined with reference to Rule 2(1) (d) of the Service Tax Rules, 1994. The effect of lifting this exemption will result in the levy of service tax on services such as content downloading from Google Play Store, I Tunes etc. by the Individual customer.

In order to give effect to the amendment, the following notifications have been issued;

• Place of Provision of Service (NN 46/2016 ST);
• Amendment in entry 34 of Mega Exemption (NN 47/2016 ST);
• Introduction of definition of “Non-Assesse Online Recipient” (NN 48/2016 ST);
• Introduction of definition of “Online Information and Database Access or Retrieval Services” (NN 48/2016 ST);
• Registration & Return (NN 48/2016 ST);

The effect of aforesaid amendment can be understood with the help below table:

By virtue of Notification No. 48/2016 ST, changes have been made in Rule 2(1) (d) for determining the person liable for payment of Service Tax. In terms of Rule 2(1) (d) of Service Tax Rules, 1994 by virtue of newly inserted item (H) recipient of such service is liable for payment of Service Tax. However in case where the receiver of service is “Non-Assesse Online Recipient” person liable for payment of service tax is distinct from the receiver of service. Below mentioned cases shows the person liable for tax;

S.No.	Case	Service Provider Location	Person Liable to pay tax	Condition
1.	Services directly by service provider to “Non Assessee Online Recipient”	Non Taxable Territory	Provider of Service	Service Provider shall: 1.   Apply for registration under ST-1A 2.  Within 30 days he is liable to pay or commencement of services 3.   File Return under ST-3C 4.   No CENVAT Credit is allowed
2.	Services through intermediary to “Non Assessee Online Recipient”	Non Taxable Territory	Intermediary	-DO- Moreover, (i) Invoice issued by the intermediary clearly indicates that service supplier in non-taxable territory and the service tax registration number of the supplier in the taxable territory; &   (ii) Intermediary neither collects or processes any payment nor responsible for the payment between the non-assesse online recipient and supplier of service; &   (iii) Intermediary involved in the supply does not authorize delivery; &   (iv) General terms and conditions of the supply are not set by the service provider; &
3.	Service directly by service provider having representative in taxable territory to “Non Assessee Online Recipient”	Non Taxable Territory	Representative of service provider for any purpose in taxable territory	Service Provider shall: 1.   Apply for registration under ST-1A 2.  Within 30 days he is liable to pay or commencement of services 3.   File Return under ST-3C 4.   No CENVAT Credit is allowed
4.	Service provided directly and having no representative in taxable territory to “Non Assessee Online Recipient”	Non Taxable Territory	Appointed person in the taxable territory by service provider	-DO-
5.	Service provided in all above cases to other than “Non Assessee Online Recipient”	Non Taxable Territory	Recipient of Service	NA

For the purpose of aforesaid notification the definition of “Non-Assessee Online Recipient” & Online Information & Database or Retrieval Access Services;

“Non-Assessee Online Recipient means Government, a local authority, a governmental authority or an individual receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory”.

“Online Information & Database or Retrieval Access Services” means 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 involving minimal human intervention, and impossible to ensure in the absence of information technology and includes electronic services such as,-

• Advertising on the internet;
• Providing cloud services;
• Provision of e-books, movie, music, software and other intangibles via telecommunication networks or internet;
• Providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network;
• Online supplies of digital content (movies, television shows music,) etc;
• Digital data storage; and
• Online gambling;