SEO services, mobile app development, and web design not classifiable as OIDAR services for export claims

CESTAT Allahabad held that search engine optimization services, mobile app development, and web design activities provided by appellant were not classifiable as Online Information and Database Access or Retrieval (OIDAR) services during April 2015 to November 2016. The tribunal found these services involved technological improvements to client websites for higher search rankings rather than providing information for database access or retrieval. Since services were not OIDAR, place of provision rules under POPS Rules 2002 were inapplicable for export claims. The impugned order was set aside and appeal allowed.

---

---

Issues Involved
1. Classification of services provided by the Appellant.
2. Applicability of Rule 9(b) of the Place of Provision of Services Rules, 2012 (POPS Rules).
3. Determination of whether the services qualify as export services.
4. Legality of the demand for Service Tax along with interest and penalty.

Issue-wise Detailed Analysis

1. Classification of Services Provided by the Appellant
The primary issue was whether the services provided by the Appellant during the period 01.04.2015 to 30.11.2016 were classifiable under the category of "Online Information and Database Access or Retrieval Services" (OIDAR). The Appellant argued that their services, including "Search Engine Optimization Service," "Google Ads/Pay Per Click Service," and "Applications & Web Development/Designing Service," did not fall under OIDAR as defined under Rule 2(l) of the POPS Rules, 2012. The Tribunal agreed with the Appellant, noting that these services did not involve providing data or information for access or retrieval in electronic form through a computer network, which is a requirement for classification under OIDAR. The Tribunal cited several judicial decisions to support this view, including Dewsoft Overseas Pvt. Ltd., Philips Electronics India Ltd., and United Telecom Ltd.

2. Applicability of Rule 9(b) of the POPS Rules
The Department had argued that the services provided by the Appellant were OIDAR services and, as per Rule 9(b) of the POPS Rules, 2012, the place of provision of service in the case of OIDAR was the location of the service provider, which in this case was India. However, the Tribunal found that the services provided by the Appellant did not meet the criteria for OIDAR services and thus, Rule 9(b) was not applicable. Consequently, the place of provision for these services was outside India.

3. Determination of Whether the Services Qualify as Export Services
Since the services provided by the Appellant were not classified as OIDAR services, the Tribunal determined that these services could be considered as export services. The Appellant had provided these services to overseas clients, and the place of provision was outside India. Therefore, the services qualified as export services, and no service tax was chargeable on them.

4. Legality of the Demand for Service Tax Along with Interest and Penalty
Given the Tribunal's findings that the services provided by the Appellant were not OIDAR services and qualified as export services, the demand for Service Tax, along with interest and penalty, was deemed illegal. The impugned order by the Pr. Commissioner, CGST Noida, was set aside, and the appeal was allowed with consequential relief.

Conclusion
The Tribunal concluded that the services provided by the Appellant did not fall under the category of OIDAR services. Consequently, Rule 9(b) of the POPS Rules was not applicable, and the services were deemed export services. The demand for Service Tax, along with interest and penalty, was set aside, and the appeal was allowed with consequential relief.

(Order pronounced in open court on – 18th July, 2024)

---