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Short answer: for a digital service supplied from outside India, first identify the exact service, the supplier’s and recipient’s locations, and whether the Indian recipient is GST-registered. A registered Indian recipient may have to pay IGST under reverse charge when the statutory conditions for a covered imported service are met. For qualifying online information and database access or retrieval (OIDAR) supplied by a person in a non-taxable territory to a non-taxable online recipient in India, the foreign supplier is responsible for registration and IGST payment under section 14 of the Integrated Goods and Services Tax Act (IGST Act). A platform or intermediary can change who is treated as the supplier.
That rule is not a blanket “foreign supplier always collects” or “Indian customer always self-assesses” answer. Digital delivery alone does not establish OIDAR status, reverse-charge liability, the place of supply, or the applicable rate.
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What the two GST routes mean
GST normally places tax collection on the supplier. Reverse charge changes that allocation: the recipient, rather than the supplier, becomes liable to pay tax on a covered supply. The IGST Act section 5(4) addresses an inter-State taxable supply by an unregistered supplier to a registered person, subject to the statutory conditions. The Central Goods and Services Tax Act (CGST Act) contains the corresponding central-tax provision for covered intra-State supplies in section 9(4). Section 5(3) of the IGST Act also permits notified categories to be placed under reverse charge.
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Supplier-collected tax is the OIDAR route in section 14 of the IGST Act. It applies in the specified case of OIDAR supplied from a non-taxable territory to a non-taxable online recipient in India. The person in the non-taxable territory must take registration and pay the applicable IGST. The section also contains a deeming rule for an intermediary that arranges or facilitates the supply, together with conditions under which that deeming rule does not apply.
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These are legal allocation rules, not labels that can be selected merely because an invoice says “digital service,” “subscription,” or “reverse charge.” The service’s legal character and the transaction structure come first.
The decision flow for an overseas digital-service purchase
Use this sequence before deciding who should pay GST. It keeps the conditions visible instead of jumping from “foreign vendor” to a tax conclusion.
- Describe what was supplied. Identify the actual product or service: for example, hosted computing, an online database, advertising, an e-book, software access, consulting, implementation, support, or a service delivered with substantial human involvement. Preserve the contract, order form, invoice, terms of use, and a description of how the service is delivered.
- Establish both locations. Determine where the supplier is located and where the recipient is located under the applicable GST place-of-supply rules. A payment made from India does not, by itself, prove every location fact needed for the analysis.
- Check the Indian recipient’s GST registration. This is the first practical fork in the CBIC example. A registered recipient may have to pay applicable IGST under reverse charge. An unregistered recipient receiving qualifying OIDAR is generally dealt with through the foreign OIDAR provider’s section 14 obligation.
- Test the OIDAR and section 14 conditions. Confirm that the service fits the statutory OIDAR definition and that the supply is from a non-taxable territory to a non-taxable online recipient. Do not treat every online or electronically delivered service as OIDAR.
- Map any platform or intermediary. Establish who contracts with the customer, who issues the invoice, who charges and processes payment, who controls delivery, and who sets the general terms. Section 14 can deem an intermediary to receive and resupply OIDAR unless the statutory exception conditions are satisfied.
- Confirm current classification, rate, invoice and reporting treatment. The general rules do not establish a rate for each digital service. Check the current consolidated legislation, notifications and the transaction documents, and obtain professional advice when classification or platform facts are disputed.
When the Indian recipient pays under reverse charge
Registered recipient and covered imported supply
For the common business scenario in which an Indian GST-registered person buys a covered service from an overseas supplier, the recipient is the party that examines and pays the applicable IGST under reverse charge when the statutory conditions are met. CBIC’s Sectoral FAQs use an online database-access example and state: “The recipient, if registered, has to pay the applicable IGST on reverse charge basis.” That sentence is useful guidance for the example, but it should not be expanded into a rule that every foreign digital purchase is automatically reverse charge.
The legal route matters. Section 5(4) of the IGST Act concerns an inter-State taxable supply by an unregistered supplier to a registered person. Section 9(4) of the CGST Act supplies the corresponding central-tax principle for covered supplies. Separately, section 5(3) allows notified categories to be placed under reverse charge. A conclusion therefore requires the supply to fall within the relevant statutory or notified category and to satisfy the other conditions, not merely the fact that the supplier has no Indian GST registration.
What the recipient should document
- The supplier’s legal identity and location outside India.
- The Indian entity’s GSTIN and the reason it is treated as the recipient.
- The contract, invoice and service description.
- Evidence supporting the place-of-supply and inter-State treatment.
- The calculation of taxable value and applicable rate after the service is classified.
- The accounting entry and tax payment evidence for the reverse-charge liability.
Those records help separate a genuine imported-service analysis from a superficial “foreign card payment” assumption. They also show why a consumer’s personal purchase and a registered business’s purchase can follow different compliance paths even when the website and product look identical.
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When the foreign supplier collects GST under the OIDAR rule
The section 14 case
Section 14 of the IGST Act places the liability on a person located in a non-taxable territory when that person supplies OIDAR to a non-taxable online recipient in India. In practical terms, the foreign OIDAR provider must register for the prescribed GST process and pay IGST on those supplies rather than expecting each unregistered Indian customer to self-assess the tax.
CBIC’s Sectoral FAQs express the contrast in the same online-database example: “If the recipient is not registered, the matter is treated as an online information and database access or retrieval service (OIDAR) and the OIDAR service provider is liable to take registration and pay tax.” The wording is tied to the facts and the statutory framework. It does not mean that every unregistered person buying any online service creates a section 14 liability; the supply must still fit the OIDAR and recipient conditions.
Who is a non-taxable online recipient?
Read the current statutory definition rather than relying on an old quotation. An official amendment memorandum says the definition of “non-taxable online recipient” was amended to remove the requirement that OIDAR be received for a purpose other than commerce, industry or business or profession. Some legacy CBIC text pages still display the earlier wording. Before making a date-specific legal conclusion, verify the current consolidated statute and the amendment’s commencement details.
The amendment matters because a recipient’s business purpose can no longer be assumed to resolve the issue by itself under the former wording. Registration status, the OIDAR definition, supplier location, recipient location and the section 14 conditions must be examined together.
What counts as OIDAR
The IGST Act defines OIDAR as services delivered through information technology over the internet or an electronic network that are essentially automated, involve minimal human intervention and cannot be supplied without information technology. The Act gives examples including internet advertising, cloud services, and e-books, movies, music, software and other intangibles delivered online.
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These examples illustrate the category; they are not a declaration that every service with a website or app interface qualifies. A product that includes significant human advice, manual implementation, live instruction or individually performed work may require a closer classification analysis. Conversely, a service marketed as a “subscription” can still be OIDAR if the actual supply is automated online access that cannot be provided without information technology.
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- Human involvement: distinguish minimal support from a substantial human service component.
- Technology dependence: ask whether the service can be supplied without the internet or electronic network.
- Contract reality: match the classification to the rights purchased, delivery method and supplier obligations.
The general materials available for this comparison do not assign a final classification to every cloud product, database, software plan, advertising package or mixed human-and-technology service. Where classification changes the tax route, obtain a review of the actual contract and delivery model.
How a platform or intermediary can change the answer
A platform can be more than a payment screen. Section 14 contains a deeming rule for an intermediary that arranges or facilitates the supply of OIDAR. Unless the statutory exception applies, the intermediary is treated as receiving the service and supplying it onward. That can move the tax and registration analysis away from the underlying foreign provider.
Questions to ask about the intermediary
- Does the platform clearly identify the OIDAR service and the foreign supplier to the customer?
- Who charges the customer and controls the payment process?
- Who controls or performs electronic delivery of the service?
- Who sets the general terms and conditions under which the customer receives it?
- Does the platform’s contract describe it as an agent, marketplace, reseller or principal?
The Act sets conditions for an exception to the intermediary deeming rule, including clear identification of the service and foreign supplier and limits on the intermediary’s role in charging, payment, delivery and general terms. These are factual tests. A platform cannot preserve the foreign supplier’s position simply by calling itself an “agent” if its conduct and contracts show that it receives and resupplies the service.
For a buyer, the practical evidence is often the checkout page, invoice issuer, terms of service, payment descriptor and account records. Keep all of them when the platform, supplier and billing entity have different names.
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Reverse charge and supplier-collected tax compared
| Question | Reverse-charge route | Supplier-collected OIDAR route |
|---|---|---|
| Who pays the tax? | The registered recipient pays applicable IGST when the covered statutory conditions are met. | The qualifying OIDAR supplier in the non-taxable territory is liable to register and pay IGST. |
| Recipient status | Typically turns on the Indian recipient being GST-registered for the relevant covered supply. | Section 14 addresses supply to a non-taxable online recipient; current definitions and amendment commencement must be checked. |
| Service scope | The supply must fit the applicable reverse-charge provision or notified category; foreign origin alone is insufficient. | The service must be OIDAR and satisfy the section 14 supplier and recipient conditions. |
| Platform effect | The contractual and factual supplier-recipient chain still needs to be established. | An intermediary may be deemed to receive and resupply the OIDAR unless the statutory exception conditions are met. |
| Reporting evidence | Maintain the reverse-charge calculation and payment records for the registered recipient’s compliance process. | The GST Portal FAQ search result describes GSTR-5A for non-resident OIDAR providers and refers to registered-person supplies shown as reverse-charge supplies. |
The table shows the allocation framework, not a rate chart. The applicable rate depends on the exact service classification and current law; no general rate should be inferred from this comparison.
Reporting and records: what is established and what still needs checking
A GST Portal FAQ search result identifies GSTR-5A in connection with non-resident OIDAR providers and includes supplies to registered persons shown as reverse-charge supplies. That result is useful for locating the reporting framework, but it is not a reliable basis for stating current filing deadlines, field-by-field instructions or the latest portal workflow. Confirm those details on the live GST Portal before filing.
For either route, retain a coherent file rather than only a payment receipt:
- Supplier and platform names, legal locations and registration details shown on the transaction.
- Customer GSTIN, if any, and the recipient’s legal entity.
- Invoice, order confirmation, terms and any tax charged at checkout.
- Description of the service and how it is delivered.
- Contractual allocation of billing, payment, delivery and support between supplier and platform.
- Classification and place-of-supply analysis used to select reverse charge or supplier payment.
- Tax computation, payment acknowledgement and relevant return records.
Do not use a portal form name as a substitute for the legal analysis. A form can be completed incorrectly if the supplier, recipient or service was classified incorrectly at the start.
Common mistakes and how to correct them
“Every foreign digital service is reverse charge”
That overstates section 5(4), section 9(4) and notified reverse-charge categories. Correct it by identifying the exact covered supply and confirming the recipient’s registration and statutory conditions.
“Every online service is OIDAR”
OIDAR requires essential automation, minimal human intervention and information-technology dependence. Revisit the delivery model and contract when a service combines software access with consulting, implementation, support or live work.
“The invoice label decides liability”
An invoice may say “tax included,” “reverse charge,” or nothing at all. The label is evidence, not the legal test. Compare the invoice with the supplier’s location, customer status, contract and platform role.
Using the old consumer-purpose wording
The amendment memorandum records removal of the former requirement that OIDAR be received for a purpose other than commerce, industry or business or profession. Because legacy pages may still show that language, check the current consolidated text and commencement details before relying on it.
Assuming a marketplace is only a payment agent
Section 14’s intermediary rule examines what the platform actually does. Review charging, payment, delivery, general terms and identification of the foreign supplier rather than accepting the platform’s description without checking the facts.
Quoting a rate without classification
This framework does not establish a rate for a particular service. Avoid a rate conclusion until the service classification and current rate notification have been verified.
A practical checklist before paying or filing
- Write a one-sentence description of the supplied service.
- Record supplier, platform and recipient locations separately.
- Mark whether the Indian recipient is GST-registered and preserve the GSTIN.
- Test the OIDAR definition against automation, human intervention and technology dependence.
- Check whether section 14’s non-taxable-territory and non-taxable-online-recipient conditions apply.
- Map who contracts, invoices, charges, processes payment, delivers and sets terms.
- Check the current consolidated statute and amendment commencement, especially for the recipient definition.
- Verify classification, place of supply, rate, invoice treatment and reporting instructions.
- Keep contracts, invoices, checkout records, tax workings and payment evidence together.
- Ask a tax professional to review the facts where a mixed service, platform structure or classification dispute could change liability.
Official references
The governing statutory text is available in the IGST Act and the corresponding CGST Act. CBIC’s example of overseas online database access appears in its Sectoral FAQs. The amendment memorandum discussing the “non-taxable online recipient” definition is available at the official memorandum PDF. The GST Portal search result referring to GSTR-5A is its FAQ page.
These materials support the allocation framework, but they do not decide every service classification, rate, place-of-supply exception or platform arrangement. Those conclusions depend on the actual transaction documents and current law.
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