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Indian GST on Digital Services

By Siffat Kaur, Ashwani & Associates

Rapid digitisation is one constant that has changed the world we live in. From buying groceries to booking cabs, almost everything is possible online. As more and more people participate in the digital economy, there is a need for countries to develop a framework to regulate and to get a “fair” share of taxes from the revenues generated by such businesses.

Development of such a framework is challenging as, typically, taxation rules have been built around traditional brick and mortar businesses. Unlike traditional businesses, digital businesses have three distinct characteristics. First, they are not physically established. Second, they rely heavily on intellectual property assets which can be quite mobile and third, they are typically located in a low-tax jurisdiction. The OECD, with the aim to deliver a set of consensus-based solutions for revision of profit allocation to G20 by 2020, has issued a discussion draft.

Though India doesn’t use the term “Digital Service Tax”, the tax is very much in place under the GST regime, in the name of Online Information and Database Access and Retrieval Service. The services included are those whose delivery is mediated by information technology over an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention.

The provisions for determining the taxability will depend upon the place where the supplier and the recipient are located. Also, all digital sales are subject to tax without any registration threshold. With newer technologies such as blockchain, virtual reality, and artificial intelligence on the rise, the pace of digitalisation is only going to accelerate. A unilateral move may expose India to retaliatory measures from other countries. As the OECD works towards a digital taxation solution, India’s interests will be better served if it works through developing a consensus-based, longer-term, multilateral solution to digital taxation.

Siffat Kaur

Siffat Kaur

GGI member firm
Ashwani & Associates, Chartered Accountants
Advisory, Auditing & Accounting, Corporate Finance, Tax
Ludhiana, India
T: +91 98554 00428
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Ashwani & Associates, Chartered Accountants is an audit, tax, and consulting firm in India with three offices. Their clients range from emerging entities to large corporations with billions of dollars as revenue. They include privately held businesses, not-for-profit organisations, and publicly traded companies. Ashwani & Associates support a local, national, and international client base.

Siffat Kaur is a B Com ACA specialising in VAT/GST consulting in cross-border business in India and abroad. She thus has experience and a vast working knowledge of all aspects of service tax, trade law, VAT, and the like. Serving clients from national and international companies and having worked in every existing kind of indirect tax branch, she offers pragmatic solutions on a cost-effective basis.

Published: Indirect Taxes Newsletter, No. 10 Spring 2020 l Photo: F8studio -

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