Now internet downloads and online services to attract Service Tax

The government has changed service tax rules on internet and online services consumption.

The change is effective 1st December 2016.

 

The following services received by consumers in India from foreign providers will attract service tax.

Internet advertisements

Cloud services

Download of e-books

Download of movies, music, software

Online supply of digital content such as TV shows

Digital data storage

Online gaming

Website and webpage hosting

Distance maintenance programs and equipment

Remote systems administration

 

Understanding the change in Service Tax Rule

[Rule change for ‘Online information and database retrieval services’ (OIDR)]

Earlier, service tax was not applicable on the above listed services between a Businesses to Consumer (B2C), those between a person located outside India and received by a person located in India.

Service tax levy was based upon ‘location of service provider’. If service provider of ‘Online information and database retrieval services’ (OIDR) was located in India, service tax was applicable.

However, now the levy will be based upon ‘location of service receiver’. Simply meaning that services will be taxable in India if the receiver (of services) is in India.

 

Important points about the change

  • As a customer, you will now be paying 15% extra as service on download of movies, books, music, cloud services etc. (B2C services)
  • If you are a business, you now have to pay service tax on reverse charge basis. Reverse charge mechanism means the receiver of service has to deposit service tax timely and pay to the government in a challan. (B2B services)
  • Only services delivered in electronic form are covered, where physical goods such as books, newsletters are delivered those are not covered. Services of professionals received over email are not covered. Advertisements in newspaper, television, posters are not covered as well.

 

Link for downloading Notifications

The Central Board of Excise and Customs released notifications on 9th November 2016 under which it changed the existing rules of service tax levy.

Here are the notifications (click to open and download the latest service tax notifications)

Notification  , Notification 46, Notification 47,  Notification 48, Notification 49.

 

Have any questions about the new service tax levy?

Are you a business and need help with depositing Service Tax? Reach out to us support@cleartax.in

and we’ll help!

 

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