Service Tax, India, AdSense, Online advertising & Bloggers

[HappyAndyK]

Will Bloggers will have to pay Service Tax in India wef 1st October 2014, @ 12.36%, for income generated out of online advertising?

Website owners from India may be well aware that Service Tax will now be applicable and payable on Online Advertisements displayed on Websites and Mobiles.

The Service Tax will be applicable only if your annual receipts are over Rs 10.00 lacs per annum. If it under this amount, you do not have to worry. If it is above this figure, you will have to pay Service Tax @ 12.36%.

You will be required to register with the Service Tax department in your city or region and it might also be a good idea to consult a Chartered Accountant or a Service Tax consultant.

This tax will be applicable wef 1st October, 2014, according to a notification released by them.

Most bloggers use Google AdSense as a monetization option. In this case, Google will have to collect Service Tax from the companies or advertisers and pay to the government. We would also be expected to charge Google Service Tax and pay this amount to the government.

But in this case we would be liable to get CENVAT credit, since otherwise this would become a case of "tax on tax" or the same service being taxed twice. CENVAT Credit is a scheme where service providers are allowed a set off, of the taxes paid on the input services, which are required for the final output service. In short, it allows the service provider to take the credit of tax paid for the service received.

What if Google says that the payments made to Bloggers are inclusive of Service Tax? In this case, we would have to pay ST out of our own pockets. The amount remaining after your pay ST, will be treated as your Income for Income Tax purposes.

But then look at it from another angle. An Indian blogger has tied up with Google and transferred over his spaces to it. Google contracts with 3rd-party companies and displays their advertisements, without the bloggers knowledge. The ads are served all over the world. In most cases the site or web property are hosted on web servers located in the US. The blogger gets his payment from Google Singapore. The blogger is in no way giving any service in India. So how can he held liable to pay Service Tax? Google India (if they are billing to local clients) may have to charge service tax from their clients (AdWords users), but not the blogger, if you look at it this way.

This is as far as my understanding goes. I will update the posts, once I get more details. Thanks for clearing up a few doubts Karan Batra.

Among the advertising industry, Service Tax will be applicable for TV and Radio ads, Outdoor advertising as well as Online advertising, but not for Press advertising.

Regards,
Anand Khanse.

[HappyAndyK]

Google India has sent email to all AdWords users. Looks like Adsense publishers may not have to pay it. (Keeping fingers crossed).

Your tax rate is changing for invoices dated on or after October 1, 2014. The rate will be changed from the current rate of 0% (zero percent) to 12.36% (inclusive of Education Cess and Secondary & Higher Education Cess). This change is due to section 114 (B) of the Finance Act (No.2) Act, 2014, which received Presidential assent on 06th August 2014 read with Notification No. 18/ 2014 - Service Tax dated 25th August 2014 issued by Ministry of Finance, Government of India. Sale on online advertisement space is no longer in the negative list category effective 01 Oct 2014. Please note that Google cannot advise you on tax matters. We recommend that you contact your tax adviser for any questions regarding this change. This service announcement is sent to all advertisers (active as well as inactive) in India and doesn't affect your account status or activity.