India 15% Service Tax on foreign e-services

Thu 17th Nov 2016

India is to impose 15% Service Tax on electronic services sold to Indian consumers by non-resident providers from 1 December 2016.

Currently, only resident providers of such digital service are liable to the consumption tax. The taxable services include: streaming or downloads of music, video and games; e-books; cloud-based software; online advertising; subscription to membership or news sites; and internet-based telephony.

The 15% tax will come into force from 1 December 2016 according the announcement by the Central Board of Excise and Customs. There will be an annual registration threshold of Rs 10Lakh, approximately €15,000. Providers will be required to register with the Indian authorities immediately via a local tax representative. The first monthly Service Tax return will be due by 6 January 2017.

Proving Indian residence

Providers will need to establish if their customers are resident in India by collecting and two of the following pieces of evidence:

  • Indian issued credit card
  • Billing address in India
  • Bank account used for settlement is in India
  • Customer has a Indian postal address
  • Customer’s IP address is from India
  • Land line for downloads is Indian coded
  • Customer’s SIM card on mobile transactions is Indian-based

GST to replace Service Tax 2017

Service Tax will be replaced by a Goods and Services Tax sometime in 2017. The likely GST comparable rate will be 16%. B2B services provided by non-residents will remain subject to the reverse charge.

Click for free Indian GST info