watch_later 29/06/17

What a wonderful initiative/venture Pulkit! My best wishes and congratulations :)

I run a web media company and work with freelancers mostly. Now most of it is via affiliate income, ads and some via online marketing/seo I do for clients. I receive all my income via wire transfers and foreign cheques. All this comes under "Online Database Access and Retrieval Service".. Is that correct?

There's some confusion
As per GST there is the all important "place of supply of service" should be outside India rule for exemption. Now the superintendents could argue that "supply of service" (called provision of service until GST came) is where the provider is located because that is where the supply of online service is made from (i have gone through this rubbish with service tax superintendents before). But this time I could argue that GST is a destination based tax and it has to be the recipient. Correct? Just need your confirmation.

There is some ambiguity about the "place of supply of service" for certain services in GST (even for export). But, it has been clearly outlined that in case of "Online Database Access and Retrieval Service", place of supply is location of service recipient. Have I got this right?


Note: your title on this website currently reads "kwoyourGST". You may want to correct that.

1 Response | Latest response: 29/06/17 | Sort by Likes(thumb_up) Recent | GST Reply
watch_later 29/06/17

You are right. To further support your opinion here are my views.

Under GST exports are zero rated that implies that there will be zero rate of tax on export supplies.

Now to understand what is an zero rated supply, need to refer section 16 of IGST Act, 2017.

As per above quoted section (cropped a part),

16. (1) “zero rated supply” means any of the following supplies of goods or services or both, namely:––

(a) export of goods or services or both; or ..........

So an export of service or goods makes it a zero rated supply.

Again we have to understand what is export.

Definition of Export of service is provided in section 2(6) of IGST Act as:

(6) “export of services” means the supply of any service when,––

  1. the supplier of service is located in India;
  2. the recipient of service is located outside India;
  3. the place of supply of service is outside India;
  4. the payment for such service has been received by the supplier of service in convertible foreign exchange; and
  5. the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;

Now, here again we have to understand what is Place of supply?

For that we need to refer section 13(12) of IGST ACT.

As per section 13(12):

(12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services.
Explanation.––For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non contradictory conditions are satisfied, namely:––

  1. The location of address presented by the recipient of services through internet is in the taxable territory;
  2. The credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory;
  3. The billing address of the recipient of services is in the taxable territory;
  4. The internet protocol address of the device used by the recipient of services is in the taxable territory;
  5. The bank of the recipient of services in which the account used for payment is maintained is in the taxable territory;
  6. The country code of the subscriber identity module card used by the recipient of services is of taxable territory;
  7. The location of the fixed land line through which the service is received by the recipient is in the taxable territory.

Now let's analyse whether services you provide falls under this or not.

Affiliate income, Advertising income such as adsense  or any other consultancy income  falls under exports and become zero rated. But for these you should satisfy at least 6 conditions out of 7 listed above.

Let us understand it with an example.

Suppose you received income from Bluehost affiliation.

You need not to pay GST if you satisfied 6 conditions our of 7 listed above.

Basically and crux of finding out whether GST is to be charged or not you need to pass 2 tests.

  • It is an export.
  • Place of supply is not within taxable territory ie. India.

Take all your products or services and test them individually whether they satisfy requirements of 3 different sections quoted above.

For any further query on this please comment.


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