Scope of OIDAR services in respect of Online Exams/Tests
Recently in the matter of NCS Pearson Inc., cited in (2020) 117 taxmann.com 189 (AAR) - Karnataka, the Karnataka Authority for Advance Ruling has decided the scope of OIDAR services for Online exams or tests conducted. The applicant company is based in USA and is engaged in conducting computer based test ('exams') to its clients (test sponsors) like educational institutes, professional licensing organizations, etc.
Applicant offers three type of tests, Type-1, Type-2 and Type-3 in India. Test-takers are typically individual candidates across the world including candidates from India, who are not registered under the CGST Act, 2017. The three types of test are described below:
Test taken in Type 1 are self-administered by the candidates ('test-takers') and are wholly digital in nature. The tests are not required to be taken from the test centres and can be taken from any location as desired by the candidate. The scores are provided by the electronic software based on a computer-based algorithm in its entirety and the test-taker gets the result in electronic format immediately on completion of the test.
Type 2 test, candidate is required to go to test centre, where an administrator will verify identity of candidate, validate test registration and appointment of candidate. Thereafter, test administrator will assign a computer to candidate to take a test and during test, candidate is continuously monitored by invigilator.
In Type-3 tests contain a mixture of multiple choice questions and analytical writing assessment section i.e., essay-based questions. However, essay based questions are then sent to a human-evaluator in United States of America (USA) for assessment and final scoring.
The term "online information and database access or retrieval services" has been defined in sub clause (17) of Section 2 of the GST Act and the relevant clause id provided hereunder:
"OIDAR" means services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services such as
The following four elements are essential for a supply to qualify as OIDAR services:
- The services are to be delivered over the Internet or an electronic network;
- The services should be essentially automated;
- The service should involve minimal human intervention and ;
- The delivery of service should be impossible in the absence of information technology.
The applicant submits that there is no guidance or judicial precedent available neither under the IGST Act nor the rule and regulations thereunder to understand as to what constitutes 'minimal human intervention' or to ascertain the level of human intervention. However, the law and the rules relating to taxability of OIDAR services under the IGST Act are same as that under the erstwhile service tax law. Hence, reference can be made to Circular No. 202/12/2016-Service Tax dated 9 November 2016 which provides clarification on classification and taxability of OIDAR services under service tax. This circular provides an indicative list of OIDAR services. At serial no. 16(5)(b) of the circular, it is specifically stated that workbooks completed by pupils online and marked automatically, without human intervention should be treated as OIDAR services.
The decision of Karnataka Authority of Advance Ruling has been concluded as follows:
|Type of Test||Nature||Remarks by AAR|
|Test - I||Online test to be Self-administered by the candidates and are wholly digital in nature||Termed as OIDAR service|
|Test - II||Online test to be attempted at specific test centre, with some manual process such as to verify identity of candidate, validate test registration and appointment of candidate, assigning of computer system and continuous monitoring by administrator and invigilator appointed by the Applicant.||Termed as OIDAR service since provision of taking tests online at designated test centres are naturally bundled activities and are supplied in conjunction with each other|
|Test - III||Online testing with more human intervention: A mixture of multiple choice questions and essay-based questions.
Essay based questions are then sent to a human-evaluator in USA for assessment and final scoring.
|Cannot be termed as OIDAR services since tests are scored after human intervention.|