Companies such as Facebook, X, Google and several edtech firms might face integrated goods and services tax up to 18 per cent on services provided to Indian government and individuals within the country.
According to a notification by the Central Board of Indirect Taxes and Customs, the services will no longer be exempted from IGST.
"This will cover overseas companies providing advertising, cloud services, music, subscriptions based service, online education and even information to all individuals and government irrespective of whether it is used for personal or business purpose," a senior official told ET.
These services, also known as OIDAR services, are defined as services provided through IT over the internet. They include advertising on the internet, cloud services, sale of e-books, movies, music and software, supply of digital content, data storage and online gaming.
The official further said that the notification will the clear the ambiguity around the definition and laws of these services.
Experts are of opinion that where some large companies already saw it coming, many smaller companies and edtech firms will be the most impacted due to the increase in compliance.
The centre in the Finance Act 2023 widened the tax scope of OIDAR services and changed the definition by removing the reference to "involving minimal human intervention" in service delivery.
Pratik Jain, Partner at PWC, said the removal of the term may have services with human intervention get covered when provided by an offshore platform.