GST: Online Tests Scored after Human Intervention classifiable as an OIDAR Service, IGST applicable, says AAAR [Read Order]

GST - Online Tests Scored - Human Intervention - OIDAR Service - IGST - AAAR - Taxscan

The Karnataka Appellate Authority of Advance Ruling (AAAR) ruled that the Integrated Goods and Service Tax (IGST) is applicable on online tests scored after human intervention as it is classifiable as an Online Information Database Access and Retrieval (OIDAR) Service.

The applicant, NCS Pearson INC is an intermediary located in nontaxable territory and provides services of online exams or tests via electronic software to the nontaxable online recipients in India which he has classified into three categories. For activities mentioned under Type l, the applicant is clear regarding the taxability and has approached the Authority only for Type 2 and Type 3 activities performed by them.

Type 3 Tests are those tests containing a mixture of multiple-choice questions and analytical writing assessment section i.e. essay-based questions. For candidates from India, the test is taken at test centers in India at a computer workstation which is physically administered and supervised by an invigilator (proctor) as described in the type 2 test.

The AAR in respect of Type 3 Tests ruled that since tests are scored after human intervention in type 3, it should be outside the purview of OIDAR and is exempted from paying Integrated Goods and Service Tax (IGST).

However, The jurisdictional CGST officer reviewed the impugned order passed by the Authority and being aggrieved by the ruling passed with regard to Type 3 test, filed an appeal before AAAR.

The revenue contended that the Type 3 test is a mixture of Multiple-Choice Questions (MCQ) and essay-based questions; that MCQ’s and its evaluation falls under OIDAR service as decided by the AAR. Further, the essay-based questions are also evaluated by the algorithm without any human intervention, and the tentative marks are provided to the candidate immediately similar to Type I and Type- 2 tests.

The only issue is that the evaluation done by the algorithm is validated through a human evaluator and only in case of a difference of more than I point, a re-evaluation is done by a different human evaluator; that the above fact shows that there is no human intervention in the basic evaluation done by the algorithm and it is only for the quality testing of the outcome that the human evaluation is brought into the picture.

The AAAR consists of D.P. Nagendra Kumar and M.S. Shrikar while allowing the appeal filed by the Principal Commissioner of Central Tax, Bangalore West Commissionerate and set aside the ruling given by the Authority for Advance Ruling with regard to the classification of the Type-3 test.

The AAAR ruled that the service provided for the Type-3 test is classifiable as an OIDAR service.

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