Around 70 international companies have received information letters from the Goods and Services Tax (GST) authorities requesting compliance with the new tax laws. Subscription-based service providers, edtech, e-gaming, and advertising companies are among those who have gotten such letters from the GST department. The new law under the GST system went into effect on October 1 and requires all digital companies, including Netflix, Google, Facebook, and Spotify, to pay Integrated GST (IGST) at the rate of 18% on services offered for either personal or professional use.

The government anticipates raising about Rs 2,000 crore this year as a result of the new regulation. The government got 700 crore rupees in taxes from foreign companies that offered significant digital services in India during the previous fiscal year.

Earlier, only business-to-business services were subject to IGST. On services obtained from overseas providers of Overseas Online Information and Database Access Trivial Services (OIDAR) services outside of India for non-business reasons, individuals and government bodies were not required to pay tax.

Any overseas supplier interested in rendering these services to Indian clients must adhere to the simplified registration requirements set out by the GST law. They must ensure tax compliance by paying IGST at the rate of 18% and registering either directly or via their agents in India. In this year’s budget, the central government increased the range of OIDAR services and did away with the concept of “minimum humanitarian intervention,” ending previous exclusions.

Additionally, unregistered recipients are now included in the definition of “non-taxable online receipts” under Section 16 of the IGST Act. In this approach, the service providers are now responsible for tax collection.

The new regulations will also guarantee that these businesses have numerous streams of income through which they may sell services that were previously exempt from taxation but are now subject to it.

OIDAR covers online or Internet-based ads, cloud services, e-books, movies, music, software, data storage, data recovery, and online gaming. According to experts, social media and OTT companies that offer OIDAR services make a sizable profit on their Indian users.

Companies who previously sought to exclude themselves from the definition of OIDAR services and offer online education, training, and advertising services are now included in the amended definition.