SC Issues Notice In PIL For Plugging Glaring Gaps In Tax Revenue Collected Through IGST By Foreign OIDAR Service Providers Like Twitter, Facebook, Etc

Supreme Court has on Wednesday issued notice in PIL filed seeking directions for plugging glaring gaps in tax revenue to be collected from foreign companies in B2B transactions by way of IGST for Online Information & Database Access or Retrieval Services (OIDAR).

A three-judge Bench led by CJI Bobde heard the plea seeking mechanism to track total GST paid on OIDAR services used by Non NTORs (Non taxable Online recipient) Indian Recipients under reverse charge basis. The plea also seeks to verify total receipts earned by foreign online service providers from India & check GST compliances.

During the hearing, Senior Advocate Sonia Mathur appeared for the petitioner. The preset plea has been filed by Advocate Charu Mathur.

The petitioner, a Chartered Accountant by profession, through this plea seeks to plug in the glaring holes in the indirect taxation system of Online Services provided by foreign service providers.

The petitioner has submitted there are glaring gaps by which loss of hundreds of thousands of dollars is caused to the national exchequer and he had made representations to the government to plug in the gap, and had also filed RTI's to find the relevant information.

The petitioner has stated that the Government has no mechanism to track total GST paid on OIDAR services used by NON NTORs Indian recipients under reverse charge basis.

The petitioner has sought directions to the government to have a mechanism to verify total receipts earned by foreign online service providers from India and to check GST compliances.

The plea has further sought a direction to the overseas service provider to have fixed establishment in India or allow Indian authorities to have no control or access to their accounting records in order to verify their compliances under GST laws. The plea has prayed for an amendment of GSTR-5A or introduction of a new form to reflect in the GST return figures of revenue generated out of services to Non NTOR.

The plea has sought a strong mechanism for overseas OIDAR like it has for others by which there is strong tax collection, compliance, and reporting mechanism through various types of periodical returns, GST audit from independent auditors and also other machinery provisions.

The petitioner has stated that OIDAR services are provided through internet and received online without any physical interface between recipient and supplier. While a detailed invoice level data is collected from individual consumer, its not collected from registered entities. Therefore, there is no mechanism to check authenticity of any tax, if deposited by the foreign giants.

" This glaring gap is a trap for leaking of precious foreign exchange which should come to India as a tax receipt." the plea has stated..

The plea has explained the process of taxation on such services. It has stated that in OIDAR services are provided by foreign companies, when service recipient in India is registered under GST, he is liable to pay tax under reverse charge basis and when they are not registered under GST, foreign company is liable to IGST.

The plea has further added that tax will be charged by OIDAR supplier only on personal consumption by an unregistered customer. Therefore, determination of liability to charge GST is based upon end use of service by the customer.

The plea has stated that at present OIDAR service providers such as Facebook, Twitter, Google, etc are earning huge revenues from Indian customers.

To explain how this happens, the an example of Amazon Web Services has been given which has a huge consumer base in India. The plea has stated that IGST is only payable on sale of services to non-business consumers in India. Accordingly the company requires users of its services for business services and who are GST registered to provide GSTIN and this ensure that IGST is not charged from such businesses on their purchase from Amazon Web series while in all other cases, IGST is charged on making purchase.

"There is no provision for submission of amount of supply made to persons other than NTOR i.e. those who are liable to pay GST under reverse charge mechanism. No details are to be made available as to the GSTIN number of any such person or the supply made to such person or tax payable by such person" the plea reads.

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