Beginning December 1 this year, a service tax component of 15% will be added to your bill if you download music or e-books from any overseas site, Times of India reported on Saturday. The tax will also apply if you buy cloud storage from any overseas service provider.
The Central Board of Excise and Customs, through four notifications dated November 9, changed the definition of 'place of provision of service'. The tax component, according to the report, is the result of amendments by the Central Board of Excise and Customs in the 'Place of Provisions of Services Rules' (PPSR) for 'online information and database access or retrieval services'.
Currently, if a service provider is based outside India then the place of provision of service is also considered outside India, thereby no service tax is payable on such services supplied to individuals, government and government bodies in India.
From December 1, the place of provision of a service will be the location of the service recipient. The report further added that overseas suppliers incur the service tax only in respect of business-to-business (B2B) transactions, where the recipient was in India.
Sunil Gabhawalla, chartered accountant and indirect tax expert told TOI, “…all downloads in India will be subject to service tax. The amendments impact overseas companies providing various services like advertisements, web subscriptions, cloud hosting, music, e-books and gaming, to name a few,”
Gabhawalla added that these services provided to governments and individuals were earlier not subject to service tax. “They now become taxable and the overseas service provider or any intermediary or authorised representative will need to register in India and pay the service tax,” he added.
The publication also reported that the definition of 'online information and database access or retrieval services' has also been changed.
“It now 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,” the report explained.