Foreign Behemoths Beware: Government Anticipates Rs 2,000 crore Revenue Hike From GST Compliance

Foreign companies like Netflix and Google, have been issued notices by the GST authorities to comply with the new 18 per cent IGST regulations.
GST Council Increases Compliance Burden
GST Council Increases Compliance Burden

The Goods and Services Tax (GST) authorities has sent tax notices to around 70 digital companies, including advertising firms, edtech, and online gaming firms, to ensure compliance with the requirements for Integrated Goods and Services Tax or IGST. These included firms such as Facebook, Google, Netflix and Spotify.

This tax is effective as of 1 October, irrespective of whether the services are for personal or business use.

The government expects to collect around Rs 2,000 crore in the current financial year (FY2023-24), which is a significant increase from the previous financial year, according to a report by Business Standard.

The GST authorities are closely monitoring companies that have been evading GST, especially smaller subscription-based players, online gaming, and advertising firms.

The new norms are aimed at ensuring compliance when overseas entities offer services to the Indian user base.

OIDAR stands for Online Information Database Access and Retrieval, and it encompasses various digital services delivered through online and internet platforms. These services include advertising, cloud services, e-books, movies, music, software, data and information retrieval services, data storage, and online gaming services.

Foreign OIDAR service providers, including over-the-top platforms and social media companies, earn significant revenue from their Indian customer base.

Online education services, gaming, and advertising, which were previously considered outside the scope of OIDAR services, now fall under the amended definition. OIDAR service providers are advised to carefully analyze the impact of these changes.

While the livestreaming of events and classes may continue to be exempt, providing access to libraries or recorded videos will now be subject to GST.

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