Annexure IV
On-line information and database access and/or retrieval:
1. As per section 65(19), 1994, the term "On-line information and data base
access or retrieval" means providing data or information, retrievable or otherwise, to
a customer in electronic form through a computer network. The words "Data",
"information", "electronic form" and "computer network" have the same meanings
assigned to them in the Information Technology Act, 2000. As per section
65(72)(zh), taxable service means any service provided to a customer, by a
commercial concern, in relation to on-line information and database access or
retrieval or both in electronic form.
2. The definitions given in the Information Technology Act, 2000 are as
follows:-
"Data" means a representation of information, knowledge, facts, concepts or
instructions which are being prepared or have been prepared in a formalised manner,
and is intended to be processed, is being processed or has been processed in a
computer system or computer network, and may be in any form (including computer
printouts, magnetic or optical storage media, punched cards, punched tapes) or
stored internally in the memory of a computer.
"Information" includes data, text, images, sound voice, codes, computer
programmes, software and data bases or micro film or computer generated micro
fiche.
"Electronic form" with reference to information means any information
generated, sent, received or stored in media, magnetic, optical computer memory,
microfilm, computer generated microfiche or similar device.
"Computer network" means the interconnection of one or more computers
through-
- .the use of satellite, microwave, terrestrial line or other communication media;
and
- terminals or a complex consisting of two or more interconnected computers
whether or nor the interconnection is continuously maintained.
3. In the context of this service, it may be relevant to point out the manner in
which on-line information and database access/retrieval is generally made available.
First, the function of what is commonly known as Internet Service Providers (ISPs).
The ISPs provide telecommunication network or gateways necessary to access
messages and databases and other information holdings of content providers. The
second element is on-line information provision services which includes database
services, provision of information on web-sites, provision of on-line data retrieval
services from data bases and other information, to all or limited number of users and
provision of on-line information by content providers.
4. Internet service providers (ISPs) provide access to the web-sites through the
computer network and the web-sites. Web-sites, in turn, provide the database or
information. Some of the well-known ISPs operating in India are VSNL, MTNL,
Satyam online, Bharti, Tata, RPG, HCL, Wipro, BPL, Mantra online, Dishnet. They
normally charge the customers on the basis of usage of time (hours). They also
provide dedicated lease lines on lump-sump payment basis. Clearly ISPs provide
service in relation to on-line information and database access or retrieval. They are
an integral part of the internet operations and without their service, the data or
information can neither be accessed nor retrieved. They are, therefore, liable to pay
service tax on the amount charged from the customers whether on usage time basis
or on lease line basis.
5. As regards paid web-sites, a few examples of Indian dot companies are,
Indiainformer.com, CIIonline.com, who charge the customer for certain specific
information contained in their website either in advance or credit basis. They shall
be also liable to pay service tax on the paid services provided by them. It is obvious
that where the information is supplied free of charge, no service tax is
payable.
6.
Point for clarification:
A question has been raised as to whether e-commerce transactions (other than
providing online information and data) are covered in the ambit of service tax. It is
clarified that in e-commerce transactions, no service of online information and
database access/retrieval is involved. Therefore, e-commerce transactions will not
ordinarily be covered under the service tax net. Normally, the web sites do not
charge the surfers for information on sale of goods or services offered by them. If
at all they do, service tax will be payable on the amount charged for providing the
information.
Another point raised relates to applicability of service tax on inter-connectivity
services provided by one ISP to another and the charges recovered for such
services. It is understood that this is done to inter connect various networks so as
to reach the server where the information is stored. It is informed that
interconnection of one ISP to another is a commercial and technical arrangement
under which service providers connect their equipment, networks and services to
enable their customers to have access to the data or information. Through this
arrangement, it is the customer of an ISP who ultimately receives on-line
information and database access and/or retrieval service. Service tax on the
amount charged from him is payable. Therefore, interconnection charges paid by
one ISP to another ISP are not liable to service tax.
A question has also been raised whether the cyber cafés will be subject to service
tax. It is clarified that the cyber cafés provide only the infrastructure such as
computer terminals and internet connection. It is the ISP or web-sites who provide
on-line access or retrieval of information, Therefore, cyber cafés are not liable to
pay service tax. Services provided by ISP to cyber café are taxable and the ISP will
pay the tax on charges realised from the cyber café.