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DGGI increases GST scrutiny of foreign digital service providers

Global VAT Compliance

India’s tax authorities are intensifying enforcement measures targeting foreign digital service providers that offer online services to Indian users without registering under the Goods and Services Tax (GST) system. The Directorate General of GST Intelligence (DGGI) is focusing on non-compliant entities under the expanded Online Information Database Access and Retrieval (OIDAR) rules introduced in October 2023.

Broader scope triggers compliance push

The revised OIDAR definition now covers a wide array of digital services delivered from outside India, including those related to virtual currencies, cloud computing, artificial intelligence, online content, advertising, and education. In light of these changes, the DGGI has identified several unregistered platforms that continue to serve Indian customers while avoiding GST obligations.

Enforcement actions underway

  • The DGGI has initiated outreach to overseas digital service providers and their associated Indian entities by issuing formal communications, including notices and guidance letters.
  • Domestic businesses that generate revenue for or cooperate with overseas platforms are being asked to provide relevant transaction details and support GST compliance efforts.
  • Payment service providers in India have been directed to suspend transactions involving unregistered foreign entities.
  • Authorities are also collecting financial data from banks and the central bank, and pursuing international cooperation through information-sharing arrangements.

Legislative developments and tax growth

Although current GST laws do not grant power to block access to non-compliant websites, the DGGI has sought new legislative authority to enable such enforcement tools.

Following the expansion of OIDAR provisions, GST collections from overseas digital services increased significantly—from ₹80 crore in 2017–18 to ₹2,675 crore in 2023–24. Experts attribute this growth to the removal of previous exclusions concerning human involvement and non-commercial use.

Registrations and ongoing investigations

To date, several hundred foreign companies have voluntarily registered under India’s OIDAR framework. Investigations into suspected non-compliance are ongoing, with some involving substantial tax demands currently under judicial review.