Recent changes in scope and rate of 6 goods and services

1. Scope of Online information and database access or retrieval (OIDAR) services enhanced

In case of OIDAR services which are provided to non-taxable online recipient (NTOR), the OIDAR service provider is required to compulsorily pay tax on forward charge mechanism (FCM). OIDAR services falls under the category of import of services where reverse charge mechanism (RCM) is applicable but the IGST Act, 2017 has shifted the liability on the OIDAR to pay tax.

There are two changes in OIDAR services w.e.f. 1-10-2023 -

1. Change in definition of OIDAR services

Earlier two conditions needed to be satisfied -

• Condition A - Services' delivery should be mediated by information technology over the internet or an electronic network and
• Condition B - Essentially automated and involving minimal human intervention

Now condition B has been omitted. So, some of the services which were earlier not covered under OIDAR are now covered.

Example -

1. Online course consisting of pre-recorded videos and downloadable PDFs plus support from a live tutor.
2. Individually commissioned content sent in digital form, eg photographs, reports, medical results.

2. Change in the definition of Non-Taxable Online Recipient (NTOR) 

Earlier, NTORmeant the following persons using OIDAR services -

1. Government, local authority, governmental authority
2. Unregistered person

in relation to any purpose other than commerce, industry or any other business or profession.

Now, NTOR means the following person using OIDAR Services -

1. Persons specified in Sec24(vi), who are required to deduct tax under section 51, whether or not separately registered under this Act. These persons are effectively Government deptt., Local Authorities, Government agencies, Authority having 51% or more participation by government, Society of Govt., PSU which have to deduct TDS u/s 51. So effectively, only those govt. organizations which are required to deduct TDS are covered under NTOR.
2. Unregistered person

Further, the words "in relation to any purpose other than commerce, industry or any other business or profession" have been deleted. Meaning thus that even if OIDAR services are taken for business purposes, service will be chargeable on FCM by OIDAR services provider.

So, if we see all the changes in totality, more services are covered under OIDAR services and more people have been added to NTOR. Thus, creating wider tax base for OIDAR services providers.

2. Un-fried or un-cooked snack-pellets, by whatever name called,manufactured through process of extrusion

Rate reduced from 18% to 5% vide NN 9/2023-CTR dated 26-7-2023, w.e.f. 27-7-2023. However, extruded snack pellets in ready-to-eat form will continue to attract 18% GST under S.No. 16 of Schedule III of notification no. 1/2017-Central Tax (Rate), dated the 28th June, 2017.

Further, in view of the prevailing genuinedoubts regarding the applicability of GST rateon the un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion, the issue for past period upto 27.7.2023 is regularized on "as is" basis through Circular No. 200/12/2023-GST dated 1-8-2023.

"As is" basis means no refund shall be made of all the tax which has been collected, but which would not have been so collected, had this clarification been in force at all material times.

Although a welcome clarification for most but the taxpayers who paid the tax will not be refunded that amount. So, to that extent it is an adverse change.

3. Fish soluble paste

Rate reduced from 18% to 5% vide NN 9/2023-CTR dated 26-7-2023, w.e.f. 27-7-2023.

Further, in view of the prevailing genuine doubts regarding the applicability of GST rate on fish soluble paste, the issue for past period upto 27.7.2023 is regularized on "as is" basis through Circular No. 200/12/2023-GST dated 1-8-2023.

4. GST rate on Imitation Zari thread or yarn known by any name in trade parlance

Rate reduced from 18% to 5% vide NN 9/2023-CTR dated 26-7-2023, w.e.f. 27-7-2023.

Further, in view of the prevailing genuine doubts regarding the applicability of GST rate on these products, the issue for past period upto 27.7.2023 is regularized on "as is" basis through Circular No. 200/12/2023-GST dated 1-8-2023.

5. Linz-Donawitz (LD) Slag

GST rate on LG Slag reduced from 18% to 5% vide NN 9/2023-CTR dated 26-7-2023, w.e.f. 27-7-2023. The Linz- Donawitz (LD) slag is an industrial waste generated in Linz- Donawitz process of steel making. This LD Slag is recyclable and finds use in agriculture as a source of nutrients, fertilizer, and soil conditioner. The government wants to encourage better utilisation of this product and for protection of environment and has thus reduced the rate.

6. Cess Rates notified

The government has notified cess on pan masala, tobacco products etc,, where it is not legally required to declare the retail sale price. The government has issued a NN 3/2023-Compensation Cess (Rate) dated 26-7-2023 regarding changes in the GST Compensation Cess rates for 'Pan Masala' and 'Tobacco Products'.