Written by the Delhi Legal Company India Entry & FDI Advisory team · Last updated August 2026 · Reviewed against the IGST Act, the CGST Act and current GST practice
Introduction
India withdrew the equalisation levy and broadened the digital services tax at almost the same time. Foreign businesses noticed the first and missed the second.
OIDAR is the GST regime for digital services supplied into India, and it reaches a foreign company with no Indian entity, no Indian staff and no Indian servers. Registration is mandatory for all foreign OIDAR providers regardless of turnover under Section 24(xi) of the CGST Act.
A foreign provider making even a single supply of OIDAR services to an unregistered person in India must register.
One transaction. No threshold. And the tax is not recoverable: foreign OIDAR providers serving Indian B2C consumers bear the full 18% IGST with zero input tax credit. This is a pure cost, which makes non-compliance tempting but increasingly risky as enforcement expands.
Two changes in 2023 widened the net considerably, and much of the published guidance still describes the pre-2023 tests. The requirement that a service be “essentially automated with minimal human intervention” was removed. And the definition of who counts as a protected recipient was broadened to cover any unregistered person — so an Indian business that is not GST-registered now triggers the foreign supplier’s liability.
There is also a closing window. In 2025 the GST Network implemented a three-year filing restriction, so returns cannot be filed after three years from the due date. A provider that has never registered has a finite period in which the position can be regularised at all.
This guide covers what OIDAR now catches, who bears the tax, the place-of-supply test, and what registration actually involves.
About this guide
Delhi Legal Company works exclusively with foreign companies establishing and operating in India. OIDAR is the Indian tax most likely to apply to a business that has never thought of itself as having an India presence, and the one that creates a direct compliance obligation without an entity.
Where a rule is settled we state it. Where guidance is out of date — and on the definitional tests a great deal of it is — we say what changed and when.
Primary sources: the Integrated Goods and Services Tax Act, 2017 including Sections 2(17), 13(12) and 14; the Central Goods and Services Tax Act, 2017 including Section 24(xi); and the Finance Act, 2023.
1. What OIDAR covers
OIDAR means digital services delivered over the internet, defined at Section 2(17) of the IGST Act, covering cloud, SaaS, streaming, e-books and gaming.
These are services delivered through the internet and received by the user without any physical interaction with the supplier — entirely digital, where the transaction, delivery and consumption happen online. When a consumer downloads an e-book and pays online, that is an OIDAR service.
1.1 The 2023 broadening
This is the change most guidance has not absorbed.
The Finance Act 2023 removed the “minimal human intervention” criterion, broadening the OIDAR definition to cover more digital services.
Under the earlier definition, a service had to be essentially automated and involve minimal human intervention. That gave a real argument to businesses whose offering combined software with human input — a platform with a support component, a SaaS product with onboarding services, a service delivered digitally but configured by people.
With that limb removed, the argument is materially narrower.
A business that assessed itself as outside OIDAR on the human-intervention test should reassess. The conclusion may have changed without the business changing anything.
1.2 What is typically caught
| Category | Examples |
|---|---|
| Software as a service | Subscription software delivered over the internet |
| Cloud services | Storage, compute, infrastructure |
| Streaming and content | Video, music, digital media |
| Digital publications | E-books, journals, databases |
| Online gaming | Games, in-app purchases |
| Digital advertising space | Advertising delivered through digital channels |
| Data and information services | Database access, analytics platforms |
2. Who bears the tax: B2B and B2C
This is the distinction that determines whether you register or your customer accounts for the tax.
| B2C — unregistered recipient | B2B — GST-registered recipient | |
|---|---|---|
| Who pays | The foreign supplier | The Indian recipient, under reverse charge |
| Registration | Mandatory via Form GST REG-10 | Not triggered by these supplies |
| Return | GSTR-5A monthly | The foreign provider does not file GSTR-5A for B2B |
| Input tax credit | None for the supplier | The Indian recipient pays and claims ITC |
2.1 Who is a non-taxable online recipient
The second 2023 broadening, and it matters more than the first.
The definition now turns on registration status. A foreign provider supplying to an unregistered Indian consumer must register, file GSTR-5A monthly and pay 18% IGST.
Previously the concept was tied to the purpose of receipt — broadly, receiving the service other than for commerce, industry or business. That excluded businesses.
Now an Indian business that is not GST-registered is an unregistered person, and the foreign supplier carries the liability for supplies to it.
For a SaaS company selling to small Indian businesses, professionals and sole traders — many of whom sit below the GST registration threshold — this changes the analysis substantially.
2.2 The mistake this produces
Assuming B2B supplies cover all Indian consumers is a common error. If even one Indian consumer is unregistered — an individual or a non-GST entity — the GSTR-5A obligation is triggered. Most consumer-facing digital platforms have both B2B and B2C consumers in India.
A business selling primarily to registered enterprises does not escape by describing itself as B2B. It escapes only if every Indian customer is GST-registered, which for a self-serve product it will not be.
2.3 Verify GSTIN at the point of sale
The practical consequence is a product requirement, not a tax one.
Collect and validate the customer’s GSTIN at checkout. Where a valid GSTIN is provided, reverse charge applies and the customer accounts for the tax. Where it is not, the supply is B2C and the foreign supplier must have registered.
Businesses that do not capture GSTIN cannot demonstrate which supplies were B2B, and default to the harder position.
3. Place of supply: the two-proxy test
How India decides the customer is in India.
Under Section 13(12), the proxies are billing address, IP address, SIM country code and credit card country. If any two place the recipient in India, GST applies.
3.1 What this means operationally
You do not get to rely on the customer’s stated country. If two independent indicators point to India, the supply is treated as made in India.
| Proxy | Captured at |
|---|---|
| Billing address | Checkout |
| IP address | Session |
| SIM country code | Mobile app usage |
| Payment instrument country | Payment processing |
3.2 The build requirement
Capturing and storing these indicators is a systems task, and it has to happen at the time of supply. Reconstructing IP addresses for transactions two years old is not realistic.
A foreign digital business selling into India should be logging the proxies contemporaneously, both to determine liability correctly and to evidence the determination if it is questioned.
4. Registration
The overseas supplier of OIDAR services to non-taxable online recipients in India must take a single registration under the Simplified Registration Scheme. Registration is granted by the Principal Commissioner of Central Tax, Bengaluru West.
| Item | Detail |
|---|---|
| Form | Form GST REG-10 |
| Threshold | None — mandatory from the first transaction regardless of turnover |
| Timing | File five days before the first Indian transaction |
| Documents | Passport, foreign tax identification number, authorised representative in India |
| Granted by | Principal Commissioner of Central Tax, Bengaluru West |
| Physical presence | Not required — physical presence in India is not needed for GST registration |
4.1 The representative requirement
Under Section 14 of the IGST Act, if the non-resident OIDAR supplier has no physical presence in India, they must appoint a representative in India to handle compliance obligations.
If the overseas supplier has an India-based representative, the representative must register and pay integrated tax on behalf of the supplier. If no local representative is present, the overseas supplier can appoint a person in India to pay integrated tax and comply with GST.
The representative appointed in India will pay tax to the government on behalf of the OIDAR service provider from their bank account.
4.2 What that actually requires
Read the last point carefully. The representative pays the tax from their own bank account.
That is a real commitment to ask of a service provider, and it is why the appointment needs proper documentation — a clear scope, an indemnity, and a funding mechanism that puts the money in the representative’s hands before the liability falls due.
A foreign business appointing a representative casually, on the assumption that it is a formality, will discover it is not on the twentieth of the month.
4.3 The five-day point
Registration is to be applied for five days before the first Indian transaction — which for a business already selling into India is a date that has passed.
Where supplies have already been made, register and address the historical position rather than delaying further. Section 10 explains why the delay compounds.
5. The monthly return
Non-resident OIDAR service providers are required to file Form GSTR-5A on a monthly basis, on or before the 20th day of the month following the relevant tax period.
| Feature | Position |
|---|---|
| Frequency | Monthly, due by the 20th |
| Nil returns | Mandatory |
| Input tax credit | Cannot be claimed under GSTR-5A |
| Payment | Full payment required before filing |
| Sequencing | Prior period returns must be filed with taxes paid before submitting current returns |
| Content | Details of supplies made to non-taxable recipients with the tax liability |
5.1 The sequencing rule is the trap
A return cannot be filed if the previous period is pending.
This makes arrears cumulative in a way most return systems do not. A provider that misses one month cannot simply file the next — it must clear the earlier month, with tax paid, before the current one can be submitted.
Miss six months and you have six months to clear in sequence before you are current.
5.2 Nil returns still have to be filed
A month with no Indian B2C supplies still requires a return. Registration creates the filing obligation; activity determines only the figures in it.
6. The intermediary rule
Relevant to any business distributing through an app store or platform.
If an intermediary, also abroad, facilitates the supply, the intermediary is treated as the supplier unless it identifies the original supplier and the service clearly on the invoice, does not authorise the charge, does not authorise delivery, and does not set the general terms — only the supplier does. Typical examples of intermediaries are Google Play Store and Apple.
6.1 What this means for a software business
Where you sell through a major app store, the store is generally treated as the supplier and accounts for the tax, because it authorises the charge, controls delivery and sets the general terms.
Where you sell direct from your own website, you are the supplier and the obligation is yours.
A business doing both has a split position: covered on the store channel, exposed on the direct channel. That is a common pattern and it is worth mapping by channel rather than assuming the store’s compliance covers everything.
6.2 Confirm rather than assume
The conditions in the rule are cumulative and specific. Where you use a smaller platform or a reseller, check which side of the line it falls on and get its position in writing, because if it is not the supplier, you are.
7. The rate, and the credit problem
18% IGST applies on most OIDAR services, with 5% on e-books under HSN 9984. There are no exemptions.
The IGST rate applies to both OIDAR service providers located in India and outside India.
7.1 Zero input tax credit
This is the commercial point.
Foreign OIDAR providers serving Indian B2C consumers bear the full 18% IGST with zero input tax credit. This is a pure cost.
An Indian supplier charges GST and recovers input tax credit on its own costs. A foreign OIDAR provider filing GSTR-5A cannot. The 18% is a straight charge on the supply.
7.2 The pricing decision
Which means the question is whether to absorb it or pass it on.
A business that has been selling to Indian consumers at a global price without accounting for GST has been absorbing 18% without knowing it, and has a historical liability computed on the amounts already received.
Going forward, Indian pricing should be set with the 18% identified. Invoices must in any event be GST-compliant and show the tax.
8. What has changed, and what is coming
Finance Act 2023 removed the minimal human intervention criterion. In 2025 the GST Network implemented a three-year filing restriction, meaning returns cannot be filed after three years from the due date. In 2026, enforcement against foreign OIDAR providers has been enhanced, with clearer place-of-supply rules for digital services.
8.1 The three-year wall
This deserves isolating, because it converts an open problem into a closing one.
A provider with historical unregistered supplies can register and file arrears — but only for periods within three years of their due date. Beyond that the return cannot be filed at all, which leaves the liability without a mechanism to discharge it through the normal process.
For a business that has been supplying India for several years, the earliest periods may already be beyond reach, and the rest are on a moving deadline.
8.2 Enforcement is increasing
Non-compliance is increasingly risky as enforcement expands.
The most common mistake is not registering because “we have no office in India”. Physical presence in India is not required for GST registration.
Indian authorities have visibility into cross-border digital payments, and the category is described as the fastest-growing area of cross-border services consumed in India. The practical assumption should be that non-registration is detectable.
9. OIDAR and income tax are separate questions
A point worth making because groups conflate them.
| OIDAR / GST | Income tax | |
|---|---|---|
| What it taxes | The supply | The income |
| Rate | 18% on value | On attributable profits, or a treaty rate |
| Trigger | One B2C supply into India | Significant economic presence or business connection thresholds |
| Treaty relief | None — GST is outside tax treaties | Available where a treaty applies |
| Recoverable | No, for the foreign supplier | Foreign tax credit generally available |
9.1 The combination is the real position
Since the equalisation levy was withdrawn and the associated exemption sunset, a foreign digital business selling into India faces both questions at once: an income tax nexus analysis under significant economic presence, and an OIDAR registration obligation under GST.
A treaty may resolve the first. Nothing resolves the second, because GST sits outside the treaty network.
See equalisation levy and digital taxation in India for the income tax side.
10. Two situations, worked through
Scenario A — The SaaS business that thought it was B2B
A European SaaS company sells subscriptions to Indian customers from Europe. Most customers are companies, so the finance team concluded the supplies were B2B under reverse charge and no registration was needed.
What was missed. A proportion of customers are sole practitioners, small firms and individuals below the GST registration threshold. Under the current definition an unregistered person is a non-taxable online recipient, whatever the purpose of the subscription.
The position. Registration was mandatory from the first such supply. Monthly GSTR-5A returns are outstanding, with 18% IGST payable on the B2C portion and no input tax credit against it.
The compounding problem. The company never captured GSTIN at checkout, so it cannot readily demonstrate which supplies were genuinely B2B.
The fix. Capture and validate GSTIN at the point of sale, register, and work back through the arrears in sequence while the three-year window remains open.
Scenario B — The business that relied on the old test
A platform combining software with a human configuration and support element assessed itself as outside OIDAR, on the basis that the service was not essentially automated and involved more than minimal human intervention.
What changed. The Finance Act 2023 removed that criterion. The assessment was correct when made and is no longer.
The lesson. A conclusion reached against a test that has since been removed is not a conclusion. Businesses that assessed themselves out of OIDAR before 2023 should reassess against the current definition.
11. Twelve mistakes
- Assuming no Indian entity means no obligation. Physical presence is not required for GST registration.
- Relying on the “minimal human intervention” test, removed by the Finance Act 2023.
- Treating all Indian business customers as B2B. An unregistered Indian business is a non-taxable online recipient.
- Not capturing GSTIN at checkout, so B2B supplies cannot be evidenced.
- Waiting for a turnover threshold. There is none — registration is required from the first transaction.
- Assuming the customer’s stated country governs. Two proxies placing them in India are enough.
- Not logging the place-of-supply proxies contemporaneously, when they cannot be reconstructed later.
- Skipping nil returns. They are mandatory once registered.
- Missing a month and filing the next, when returns must be filed in sequence with prior periods cleared.
- Assuming the app store covers the direct channel too. Map the position by channel.
- Appointing a representative casually, when that person pays the tax from their own account.
- Delaying regularisation, when the three-year filing restriction closes the window period by period.
12. Checklist
Assessment
- Services assessed against the current OIDAR definition, not the pre-2023 human-intervention test
- Indian customer base split between GST-registered and unregistered
- Channels mapped — direct, app store, reseller — and the intermediary position established for each
- Place-of-supply proxies identified and available: billing address, IP, SIM country, payment instrument country
- Historical supplies quantified, with the three-year filing window checked period by period
Registration
- Form GST REG-10 prepared, with passport, foreign tax identification number and authorised representative details
- Authorised representative appointed under a documented engagement covering scope, indemnity and funding — they pay the tax from their own account
- Application made ahead of supplies where possible; where supplies have begun, registered without further delay
Systems
- GSTIN captured and validated at checkout, with reverse charge applied where valid
- Place-of-supply proxies logged at the time of each transaction and retained
- GST-compliant invoices issued to Indian customers showing the tax
- Indian pricing set with 18% identified, and the absorb-or-pass-on decision taken deliberately
Ongoing
- GSTR-5A filed monthly by the 20th, including nil returns
- Tax paid in full before each filing
- Returns filed in sequence, with no period left pending
- Funding to the representative arranged ahead of each due date
- Separate income tax analysis run on significant economic presence and treaty position
Selling digital services into India?
The obligation starts at the first supply to an unregistered Indian customer, and the window to regularise historical periods closes three years at a time. Tell us what you sell, through which channels, and to whom in India and we will tell you whether OIDAR applies, which supplies are B2C, and what is still within reach.
13. Frequently asked questions
Q1. What are OIDAR services?
Online Information and Database Access or Retrieval services — digital services delivered over the internet and received without physical interaction with the supplier, defined at Section 2(17) of the IGST Act. They cover cloud, SaaS, streaming, e-books, gaming, digital advertising and database access.
Q2. Does OIDAR apply to a company with no Indian entity?
Yes. Physical presence in India is not required for GST registration. A foreign provider supplying OIDAR services to unregistered persons in India must register regardless of whether it has any Indian establishment, staff or servers.
Q3. Is there a turnover threshold?
No. Registration is mandatory for foreign OIDAR providers regardless of turnover under Section 24(xi) of the CGST Act, and a single supply to an unregistered person in India triggers it. Unlike ordinary GST registration, there is no threshold exemption.
Q4. Does the service still have to be “automated with minimal human intervention”?
No. The Finance Act 2023 removed the minimal human intervention criterion, broadening the definition to cover more digital services. A business that assessed itself as outside OIDAR on that test should reassess, because the conclusion may have changed without the business changing anything.
Q5. Who is a non-taxable online recipient?
An unregistered person in India. The definition now turns on GST registration status rather than the purpose of receipt, so an Indian business that is not GST-registered is a non-taxable online recipient and the foreign supplier carries the liability for supplies to it.
Q6. What happens with B2B supplies?
Reverse charge applies. Where the Indian recipient is GST-registered, that recipient pays the GST and claims input tax credit, and the foreign provider does not file GSTR-5A for those supplies.
Q7. Can a business avoid registration by being B2B only?
Only if every Indian customer is GST-registered. Assuming B2B supplies cover all Indian consumers is a common error — if even one Indian consumer is unregistered, whether an individual or a non-GST entity, the GSTR-5A obligation is triggered. Most consumer-facing platforms have both.
Q8. How should GSTIN be handled at checkout?
Collect and validate it. Where a valid GSTIN is provided, reverse charge applies and the customer accounts for the tax; where it is not, the supply is B2C and the foreign supplier must be registered. A business that does not capture GSTIN cannot demonstrate which supplies were B2B.
Q9. How does India determine the customer is in India?
Through proxies under Section 13(12) — billing address, IP address, SIM country code and payment instrument country. If any two place the recipient in India, GST applies. The customer’s stated country does not govern.
Q10. Do the place-of-supply proxies need to be recorded?
Yes, contemporaneously. They cannot realistically be reconstructed for transactions years old, and they are needed both to determine liability correctly and to evidence the determination if it is questioned. This is a systems requirement.
Q11. How does a foreign provider register?
Through the Simplified Registration Scheme using Form GST REG-10, with registration granted by the Principal Commissioner of Central Tax, Bengaluru West. The application should be filed five days before the first Indian transaction, with passport, foreign tax identification number and authorised representative details.
Q12. Is an Indian representative required?
Yes where there is no physical presence in India. Under Section 14 of the IGST Act the supplier must appoint a representative in India to handle compliance, and that representative pays the tax to the government from their own bank account on behalf of the supplier.
Q13. What does that mean for the representative appointment?
It needs proper documentation rather than a casual arrangement — a clear scope, an indemnity, and a funding mechanism putting money in the representative’s hands before the liability falls due. Paying tax from one’s own account is a substantial commitment to ask of a service provider.
Q14. What return is filed and when?
Form GSTR-5A, monthly, on or before the 20th day of the month following the tax period. Nil returns are mandatory, full payment is required before filing, and input tax credit cannot be claimed under GSTR-5A.
Q15. What happens if a month is missed?
The next return cannot be filed until it is cleared. Prior period returns must be filed with taxes paid before current returns can be submitted, which makes arrears cumulative — miss six months and you have six months to clear in sequence before becoming current.
Q16. What is the GST rate on OIDAR services?
18% IGST on most OIDAR services, with 5% on e-books under HSN 9984. There are no exemptions, and the rate applies to providers located both inside and outside India.
Q17. Can a foreign OIDAR provider claim input tax credit?
No. Providers filing GSTR-5A cannot claim input tax credit, so the 18% is a pure cost on supplies to Indian consumers rather than a tax collected and offset. This is the commercial point that should drive the Indian pricing decision.
Q18. How does the intermediary rule work?
Where an intermediary abroad facilitates the supply, it is treated as the supplier unless it identifies the original supplier and service on the invoice, does not authorise the charge, does not authorise delivery, and does not set the general terms. App stores are the typical example and generally are treated as the supplier.
Q19. Does selling through an app store cover all our India supplies?
Only that channel. A business selling both through a store and direct from its own website has a split position — covered on the store channel, exposed on the direct one. Map the position by channel rather than assuming the store’s compliance covers everything.
Q20. What is the three-year filing restriction?
A restriction implemented by the GST Network in 2025 under which returns cannot be filed after three years from the due date. A provider with historical unregistered supplies can register and file arrears, but only for periods within that window — which closes period by period.
Q21. Is enforcement actually increasing?
Yes. Enforcement against foreign OIDAR providers has been enhanced in 2026 with clearer place-of-supply rules, and the category is among the fastest-growing areas of cross-border services consumed in India. The practical assumption should be that non-registration is detectable.
Q22. Is OIDAR the same question as income tax nexus?
No, they are separate and both can apply. OIDAR taxes the supply at 18% with no treaty relief available, because GST sits outside the treaty network. Income tax turns on significant economic presence or business connection, where a treaty may provide relief. Since the equalisation levy withdrawal, a foreign digital business faces both questions at once.
Related reading
- Equalisation levy and digital taxation in India — the income tax side of the same business
- Permanent establishment risk in India — significant economic presence and the treaty position
- Best business structures in India for foreign companies — whether to have an Indian entity at all
- GST compliance — registration, returns and representation
Talk to us before the next Indian sale
Delhi Legal Company works exclusively with foreign companies establishing and operating in India. OIDAR assessment and registration, authorised representative arrangements, GSTR-5A filing and arrears regularisation, and the separate income tax nexus analysis — handled together, because both regimes reach the same business for the same reason.
How we usually start. Tell us what you sell, through which channels, what proportion of your Indian customers are GST-registered, and how long you have been supplying India. We come back with whether OIDAR applies, which supplies are B2C, what registration involves, and what historical periods are still within the filing window.