OIDAR Classification of Mobile Value-Added Services Confirmed by CESTAT

OIDAR Classification of Mobile Value-Added Services Confirmed by CESTAT

Introduction

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that mobile value-added services (MVAS) provided to telephone service providers are classifiable as Online Information Database Access and Retrieval Services (OIDAR) under the Finance Act, 1994, and therefore, service tax is applicable.

Factual Background

The assessee, M/s. OnMobile Global Ltd., is engaged in the business of providing Mobile Value-Added Services (MVAS)—such as ringtones, horoscopes, jokes, and games—to telephone service providers in India and abroad. These services are accessible online via telecom operators, and the assessee is registered for rendering database access, business auxiliary, and GTA services, among others.

Procedural Background

It was alleged that the assessee had not paid service tax on OIDAR services provided from their Bangalore office to customers located outside India.

As a result, the department issued a show-cause notice, which was followed by confirmation of demand, along with interest and penalty. The assessee subsequently filed an appeal before CESTAT.

Contentions of the Parties

Appellant’s Contentions: The assessee argued that its services do not fall under OIDAR but rather under Information Technology Software Services (ITSS).

They relied on Instruction F.No. B.11/1/2001-TRU dated 09.07.2001, which states that interconnectivity services between ISPs should not be taxed as OIDAR.

Revenue’s Contentions: The department asserted that the MVAS were owned by the assessee, retrievable electronically, and thus clearly fall under OIDAR.

They further noted that subscribers accessed these services via telecom networks, typically on payment, which matches the statutory definition of OIDAR.

Tribunal’s Observations

The Bench comprising Dr. D.M. Misra (Judicial Member) and R. Bhagya Devi (Technical Member) examined Sections 65(75) and 65(105)(zh) of the Finance Act, 1994.

The Tribunal held that:

“An activity qualifies as OIDAR when it involves providing information or data accessible in electronic form via computer networks.”

Reasoning & Analysis

The Tribunal found that the assessee:

• Owns the content (e.g., ringtones, jokes, games)
• Enables retrieval of this content online
• Charges customers through telecom operators
• Operates through the Global Network Operation Centre (GNOC) at Bangalore

As such, the service involves online delivery and retrieval, fulfilling the legal requirements of OIDAR.

The Tribunal rejected the assessee's claim that MVAS could be classified as ITSS.

Implications

This ruling reinforces the scope of OIDAR classification, especially for digital content providers.

It clarifies that online content retrieval services, even if linked to telecom platforms, are liable for service tax under OIDAR, not exempted as ITSS.

This could impact multiple MVAS providers operating under similar models, potentially increasing compliance obligations and tax liability.

Outcome

The Tribunal upheld the demand for service tax, confirming that the services fall under OIDAR, not ITSS, and therefore are taxable.

In this case the appellant was represented by Mr. G. Shivadass, Advocate. Meanwhile the respondent was represented by Mr. P.R.V. Ramanan, Advocate.