GST Classification of Online Testing Services as OIDAR
The Appellate Authority ruled that computer-based tests involving minor human essay evaluation still qualify as Online Information and Database Retrieval (OIDAR) services.
- Ruling
- ORDER NO. KAR/AAAR/ 07 /2020-21, DATE: 13-11-2020
- Authority
- Appellate Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- NCS Pearson asked if their testing services qualify as OIDAR services.
- The authority ruled that human essay scoring is minimal human intervention.
- Services remain OIDAR even with minor human quality checks.
- The ruling confirms these services are essentially automated.
In short
The company asked whether their computer-based testing services, which include human-graded essays, count as Online Information and Database Retrieval (OIDAR) services under GST. The tax authority had to decide if human involvement in grading disqualified the service from being considered 'essentially automated.' They concluded that because the human role is limited to quality assurance, the service still qualifies as OIDAR.
What has changed
How it worked before
Businesses were uncertain if any human involvement in a digital service, such as manual essay grading, would disqualify them from the OIDAR classification.
What has changed
The authority clarified that 'minimal human intervention' allows for human quality checks without losing OIDAR status. This means businesses providing hybrid digital services can now more confidently classify their offerings as OIDAR if the core delivery remains automated.
Who this affects
Companies providing digital testing, educational platforms, or automated services that include minor human validation steps.
An example
A software company provides an automated coding test where a human mentor reviews the final output for quality. Based on this ruling, they could argue their service is OIDAR because the mentor's role is a minor validation step. They should document how much of the process is automated versus human-led to support this classification.
What you should do
Review your service delivery model to see if human involvement is truly minimal. Remember that this ruling only binds the company that asked; your local tax officer may still hold a different view on your specific service.
If you do nothing
If you incorrectly classify your services as OIDAR, you may face tax demands for unpaid Integrated GST (IGST) if the department disagrees. Tax officers are not bound by this ruling and may impose penalties or interest for incorrect tax payments. Always seek professional advice before changing your tax classification based on a single ruling.
The terms explained
- OIDAR
- Services provided through the internet where the delivery is essentially automated and involves minimal human intervention.
- Minimal human intervention
- A level of human involvement that is not essential to the core delivery of the service, such as simple quality checks.
- Essentially automated
- A service that functions primarily through software or digital systems without requiring constant human input.
The ruling in detail
Appellate Authority for Advance Ruling
Principal Commissioner of Central Tax, Bangalore West Commissionerate
ORDER NO. KAR/AAAR/ 07 /2020-21, DATE: 13-11-2020 · Karnataka
Questions before the authority
- Whether the service provided for type 2 test (the specified service) classifies as 'Online Information and Database Retrieval Services'?
- If the type 2 test provided by the applicant does not qualify as 'Online Information and Database Retrieval Services', whether the applicant is liable to pay integrated tax on the supply of said services to non-taxable online recipients in India?
- Whether the service provided for type 3 test (the specified service) classifies as 'Online Information and Database Retrieval Services'?
- If the type 3 test provided by the applicant does not qualify as 'Online Information and Database Retrieval Services', whether the applicant is liable to pay integrated tax on the supply of said services to non-taxable online recipients in India?
Facts
The Respondent Company provides computer-based test administration solutions to clients, including candidates in India. These tests are categorized into three types, with Type 3 involving a mix of multiple-choice questions and essay-based questions. The core dispute concerns whether the Type 3 test, which involves human evaluation of essays, qualifies as OIDAR services under the GST law.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification of Type 2 test as OIDAR | Not explicitly ruled upon in the final order, as the appeal focused on Type 3. The lower authority had previously held it as OIDAR. |
| Taxability of Type 2 test | Not explicitly ruled upon in the final order. The lower authority had previously held it as OIDAR. |
| Classification of Type 3 test as OIDAR | Yes, it is classifiable as an OIDAR service. The Appellate Authority reversed the lower authority's decision. |
| Taxability of Type 3 test | Not explicitly ruled upon in the final order. The ruling focused on the classification as OIDAR. |
The Appellate Authority set aside the lower Authority's ruling regarding the Type 3 test. It held that the Type 3 test is classifiable as an OIDAR service. The involvement of human scorers for essay evaluation is considered to be within the realm of minimal human intervention.
Reasoning
The Authority examined the definition of OIDAR services under Section 2(17) of the IGST Act, 2017, which requires the service to be essentially automated and involve minimal human intervention. It concluded that the human involvement in scoring essays is a quality control measure to validate the automated system, rather than a core service delivery component. Therefore, the service remains **essentially automated** and satisfies the **minimal human intervention** requirement. The Authority relied on the principles of the European Commission VAT Committee Working Paper No 896 to interpret the concept of minimal human intervention.
Provisions relied on
- Section 99 of the Karnataka Goods and Services Tax Act, 2017
- Section 101 of the CGST Act, 2017
- Section 100 of the Central Goods and Service Tax Act, 2017
- Section 2(17) of the IGST Act, 2017
- Section 13(2) of the IGST Act, 2017
- Section 2(11) and 7(4) of the IGST Act, 2017
- Notification No. 10/2017-IGST (Rate) dated 28-06-2017
- Notification No. 9/2017-Integrated Tax (Rate) dated 28-06-2017
For the practitioner
This ruling clarifies that the presence of human intervention for quality assurance or validation in an otherwise automated digital process does not necessarily disqualify a service from being classified as OIDAR. It provides a favorable precedent for service providers using hybrid automated-human systems to argue for OIDAR classification. Practitioners should note that the decision hinges on the **minimal nature of human intervention** relative to the overall automated process.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/2024-02/kar_aaar_07_2020-21_13.11.2020_pcctb.pdf
Legibility of the scan, as read: high.
Prepared 13-10-2026.
About Patron Accounting LLP
Patron Accounting LLP is a CA and CS-led accounting and compliance firm that has been working with businesses across India since 2019. We handle the work that keeps a company correct with every department it answers to: day-to-day bookkeeping and accounting, GST registration and returns, income tax filing and assessments, TDS, payroll and PF/ESI, company and LLP incorporation, ROC and MCA compliance, statutory and internal audit, physical stock and inventory audits, trademark and other registrations, and the certificates and reports that banks, buyers and regulators ask for.
Our clients range from a first proprietorship registering for GST to established companies running operations across several states. Much of our work is exactly this: reading what a department has published and telling a business, in plain terms, whether it changes anything for them.
We operate from five offices and serve clients across the rest of India remotely:
- Pune (HQ): RTC Silver, B4-708, Sai Satyam Park, Wagholi, Pune, Maharashtra 412207
- Mumbai: 104, Rajshila Building, 597 J.S.S. Road, Marine Lines, Mumbai 400002
- Delhi: 3rd Floor, B-6/154-155, Sector 5, Rohini, Delhi 110085
- Gurugram: Pioneer Urban Square, B109, Golf Course Ext Road, Sector 62, Gurugram 122098
- Ahmedabad: Phoenix Tower, 1107, near Commerce Six Road, Drive In Road, Navrangpura, Ahmedabad, Gujarat 380009
If anything on this page affects you and you would like somebody to look at your own position, we are glad to help. Call +91 94594 56700, write to sales@patronaccounting.com, or visit patronaccounting.com. The first conversation costs nothing.