The Authority of Advance Ruling (AAR) Karnataka issued the ruling on the online tests scored after human intervention are outside the purview of Online Information Database Access and Retrieval (OIDAR) and is exempted from paying Integrated Goods and Service Tax (IGST).
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 1 Tests are those tests that are self-administered by the candidates (test-takers) and are wholly digital in nature. The scores are provided by the electronic software based on a computer-based algorithm in its entirety and the test-taker gets the result in electronic format immediately on completion of the test. In view of this, the entire test experience is electronic without any human intervention.
Type 2 Tests are those tests similar to type 1 tests regarding the creating personal profile, scheduling an appointment for the test and remitting payment on the Pearson VUE website, however, with the major difference being that on the day of the test, the candidate is required to go to the test center, where an administrator will verify the identity of the candidate, validate test registration and appointment of the candidate. After that, the test administrator will assign a computer to the candidate to take a test.
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 Authority consisting of members Dr. M.P. Ravi Prasad and Mashooq Ur Rehman Farooqui, while answering in respect of the Type 2 Tests ruled that provision of taking tests online at designated test centers are naturally bundled activities and are supplied in conjunction with each other in the ordinary course of business and therefore can be termed as Composite Supply as per Section 2 (30) of CGST Act, 2017. Here, since the main object of the whole activity is to take online tests, the principal supply would be OIDAR service provided by the applicant to nontaxable online recipients.
The Authority in respect of Type 3 Tests further 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).
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