Book, movies and other downloads from foreign sites will become costlier starting December 1. The Central Board of Excise and Customs (CBEC) has made amendments to the existing Place of Provisions of Services Rules (PPSR) for online information and database access or retrieval services. One will have to pay an additional 15 per cent service tax on any downloads from foreign websites starting from 1st December 2016.
The domestic suppliers already incur this service tax. However, if the supplier is placed India, the place of provision of service is also outside India and therefore, there is no service tax rule for them. Also Foreign service providers do not have to pay service tax for Business-to-Business (B2B) transactions or if the recipient is based in India.
The new amendment is the result of pressure put on the government by the Indian service providers. The government aims to bring equality and uniformity amidst the local and overseas website and service providers with this change.
According to the amendment, starting December 1, 2016, the ‘place of provision of a service’ will be the ‘location of the service recipient’. This means that for every downloads, cloud hosting and even online gaming by an Indian individual from a foreign website will incur a service tax of 15 per cent
“With this amendment, B2C transactions will also fall within the ambit of service tax. The obligation to comply with taxation in a B2C situation is on the service provider based outside India, therefore the enforcement, levy and collection of such service tax would be a challenge,” Aseem Chawla, Managing Partner, ASC Legal told Economic Times.
Starting December 1, services such as downloading e-books, music, movies, software, cloud hosting, subscription to sites like Netflix , online gaming, digital data storage services and online advertising will attract a service tax of 15 per cent.
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