Does your SaaS or web app qualify as OIDAR in India?
Are you running a SaaS, PaaS, cloud product, or dApp that now has Indian users? The fact that customers sign up on a website does not answer whether your service is OIDAR. The useful question is how the service is actually delivered.
OIDAR means Online Information and Database Access or Retrieval services. It is defined in section 2(17) of India’s IGST Act, the Integrated Goods and Services Tax Act, 2017. The current test asks whether delivery is mediated by information technology over the internet or an electronic network and whether the service is, by its nature, impossible to supply without information technology. The statute lists examples such as advertising, cloud services, digital content, online storage, and software. “Essentially automated” and “minimal human intervention” are not elements of the current definition; those words were removed by section 160 of the Finance Act, 2023, effective 1 October 2023. Classify the actual service and any bundled services on their facts. IGST means Integrated Goods and Services Tax, a component of India’s GST system. OIDAR is a service category, not a tax. SaaS means Software as a Service; PaaS means Platform as a Service; a dApp is a decentralised application. Sources: The OIDAR definition is in section 2(17) of the IGST Act.; Finance Act, 2023, section 160, and Notification 28/2023-Central Tax.
The current statutory OIDAR test
Section 2(17) asks two core questions about the service:
- Is its delivery mediated by information technology over the internet or an electronic network?
- Is the service, by its nature, impossible to supply without information technology?
The Act also lists examples, including online advertising, cloud services, digital content, data storage, and software. Automation and the amount of human support are not separate elements of the current definition.
Think of a customer who pays for access to hosted software through an online account. Ask whether delivery is mediated by information technology over the internet or an electronic network and whether the service, by its nature, is impossible to supply without information technology. The fact that a system provisions accounts automatically is not a separate statutory test.
The Act’s examples include advertising on the internet, cloud services, e-books and other digital content, online data storage, and online supplies of software. These examples are useful clues, not a rule that every service with a screen is automatically OIDAR.
What if experts support the service?
Compare two offers. In one, a customer subscribes to online software. In the other, a customer pays a consultant to review records and prepare a tailored report, shared through a portal. The facts help identify the service being supplied. The current statutory definition does not add a separate test based on how much human work is involved.
For a bundled offer, separate the pieces: software access, customer support, implementation, training, professional advice, and custom work. Check the contract and what the customer is really buying. Do not classify by the marketing label alone. “SaaS,” “AI tool,” and “digital service” are commercial descriptions, not answers to every tax question.
With a PaaS product or dApp, decentralised architecture may make it harder to identify who supplies the service and who receives payment. That is a separate question from whether the service meets the OIDAR definition; the product label or architecture does not answer either question by itself.
OIDAR is only one step
After classification, identify the supplier, recipient, recipient location, and transaction route. The recipient is the person receiving the service for tax purposes; the payer and user may differ. The Act has distinct provisions for place of supply and for offshore OIDAR supplied to a defined non-taxable online recipient. Those issues are addressed separately in sections 13 and 14. Read the relevant IGST Act provisions.
Before deciding, save evidence: product flows, service terms, onboarding steps, support commitments, invoices, payment records, and the role of any marketplace. This helps the tax team describe the service and apply the statutory test.
Compare three common digital-service models
Hosted software: A customer pays for online access to a tool. Ask whether delivery is mediated by the internet or an electronic network and whether the service, by its nature, can be supplied without information technology. The software label alone does not decide the answer.
Cloud or platform access: A customer rents storage, computing capacity, or a development platform through an online account. Cloud services appear in the Act’s examples. Still, review the specific contract and what the provider does. A product may include technical support, migration, or custom engineering that needs separate analysis.
Professional service delivered through a portal: A customer pays a specialist to review material and prepare a tailored result, then receives it through a portal. The portal alone does not decide OIDAR status. Identify the actual service and apply both statutory questions to it.
These examples are not automatic classifications. For each offer, describe what the customer receives, how it is delivered, whether information technology is essential to supply it, and whether the package includes distinct services. Assess those facts under the current statutory definition.
How to test a bundle without guessing
For each paid plan, list every promise in the order form or service page. Separate software access, storage, advertising, implementation, consulting, training, customer support, and custom output. Identify whether the customer buys one combined service or distinct supplies. Compare the contract with the actual service, then apply the current statutory definition. Do not treat automation or staff involvement as an extra legal test.
Record what “human support” means. A help desk answering occasional account questions may differ from an expert who performs the core service for each customer. Human involvement alone does not decide OIDAR status. Apply the current statutory test to the actual service and separately assess distinct or bundled supplies.
Frequently asked questions
Is every online service OIDAR?
No. An online booking page, video call, or payment form does not alone satisfy the OIDAR definition. The service itself must be assessed under the statutory elements.
Are SaaS and PaaS named in the law?
The Act gives online supplies of software and cloud services as examples. SaaS means Software as a Service; PaaS means Platform as a Service. These business labels can describe the facts, but the statutory OIDAR test still controls.
Does a dApp avoid the OIDAR rules?
No automatic exemption follows from calling a product a decentralised application. The team should identify what is supplied, who operates the relevant service, how the customer receives it, and who collects the consideration.
What if our service combines software and experts?
Document each service, how it is delivered, what the customer receives, and whether the bundle contains distinct supplies. Apply the current statutory definition to those facts. A staff-work estimate may help describe operations, but it is not a separate OIDAR test.
Quick check: Is the service delivered through the internet or an electronic network? Is its nature such that it cannot be supplied without information technology? Identify the actual service, supplier, recipient, and any separate services in the bundle. These are screening questions; confirm the classification against the full statutory definition and transaction facts.
This is a general explainer, not an individual tax opinion. Classification and obligations depend on the service and current law.
Related reading: Who pays IGST on offshore services; registration, returns, and records for a qualifying foreign OIDAR supplier.
Primary source: Integrated Goods and Services Tax Act, 2017, sections 2(17), 13 and 14.
This article is for general awareness and is not legal advice. Laws change and every matter turns on its facts — please seek independent counsel before acting on it.
