The question we are asked most often by overseas software, streaming, gaming and subscription businesses is disarmingly simple: we have no presence in India, so why would Indian tax reach us at all? The answer lies in a specific regime the Integrated Goods and Services Tax Act, 2017 built for exactly this situation, the taxation of Online Information and Database Access or Retrieval services, universally shortened to OIDAR. Where a foreign supplier delivers a digital service over the internet to an ordinary consumer in India, the tax follows the consumer, not the server. Physical presence is irrelevant. That single design choice is what pulls a company that has never set foot in India into the Indian tax net.
The dividing line that governs everything is who the customer is. Where the Indian customer is a registered business, the transaction is business-to-business and the liability shifts to the Indian recipient under reverse charge, so the foreign supplier has nothing to collect. Where the customer is an individual consumer, a government body or any unregistered person, the transaction is business-to-consumer, and here the obligation sits squarely on the overseas supplier: it must register in India, charge Indian GST on the sale, and remit it. Most digital businesses have a blended customer base, and the compliance failure we see repeatedly is a company that correctly ignored its enterprise sales but never realised its consumer app-store, website or subscription revenue carried a live Indian liability.
The reach of this regime widened materially with effect from 1 October 2023. Earlier, OIDAR was confined to services that were essentially automated and involved minimal human intervention, and a carve-out existed for supplies to certain non-taxable recipients. Both qualifiers were removed. The practical consequence is that a far broader spectrum of digital offerings, including services with a meaningful human element, now falls within OIDAR, and the exemptions that overseas suppliers previously leaned on have narrowed. Any digital business that assessed its Indian position before that amendment and concluded it was outside the net should treat that conclusion as stale and re-examine it against the current text.
Compliance itself is deliberately built for a company with no Indian establishment. The supplier obtains a simplified registration meant for overseas OIDAR providers, files the periodic return prescribed for that category, and pays integrated GST at the rate applicable to the service, which for the overwhelming majority of digital services is the standard eighteen percent, unchanged in substance by the move to a leaner two-rate structure that took effect on 22 September 2025. Critically, there is no small-supplier threshold for a foreign OIDAR provider. The liability attaches from the first taxable rupee of consumer revenue, so a modest but steady stream of Indian subscriptions is enough to create a registration obligation that grows more expensive to regularise the longer it is left.
The exposure of ignoring the regime is not merely the tax. It is the tax that was never collected from customers, now payable out of the company's own margin, together with interest running from each missed period and penalties layered on top. Because the amounts were never passed on to consumers at the point of sale, they cannot realistically be recovered afterwards, so an unmanaged OIDAR position converts directly into an erosion of profit and, in an acquisition or funding round, into a diligence finding that a buyer will price against the seller. We have seen live deals repriced on precisely this issue.
The disciplined approach is to resolve the position before a notice forces it. That means classifying the service against the current OIDAR definition, segmenting revenue cleanly between business and consumer channels so the reverse-charge sales are provably excluded, registering where consumer revenue exists, and building the ongoing return and payment cycle into the finance function rather than treating it as a one-off. For a foreign digital business, getting this right is not a defensive chore; it is what allows the company to sell into one of the world's largest consumer markets without carrying a silent, compounding liability on its balance sheet. That is the counsel AMLEGALS provides to overseas digital suppliers: not a warning, but a clean and defensible route to trading in India on the right side of the law.
