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Service Tax on AdSense Earnings in India

Topic Revisited, with 31th march deadline.

     
2:55 am on Mar 23, 2006 (gmt 0)

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This is in continuation with the topic we discussed in feb 2006 - ( [webmasterworld.com...] ).

With the service tax non clarification on the subject, I would like to discuss and know what decisions have you all taken about paying the service tax. ( pls note that the Income Tax is already being paid on these earnings ).

Have you guys talked to your accountants ( CAs etc ), to study the matter? My advisor is a little blank even after lengthy discussion.

If this service is seen as IT exports and you already have an IEcode from govt of india, then it MAY be exempted from excise / service tax. Even this does not have 100% clarity.

What is your personal take on this, and are you paying it before this 31st march? ( say yes or no also , to se the trend )

6:37 am on Mar 23, 2006 (gmt 0)

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My CA's view NO. not applicable. he is also CA for well known MNC IT companies here as well as studing Adsense and Adwords since last 8 months in context with law.
6:56 am on Mar 23, 2006 (gmt 0)

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My CA said the same thing. No service tax applicable for adsense [Just the usual income tax after deducting business expenditure] as the source of earning is not a service. However I have been asked by him to register with the service tax as a web development company and pay service tax on in-house ads and subscription charges.
6:57 am on Mar 24, 2006 (gmt 0)

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my auditor , doesn't have any idea about this, and i don't know what to do.
8:20 am on Mar 24, 2006 (gmt 0)

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Mine is a small proprietory firm into its first year. Haven't registered for service tax yet and I'm not even sure I need to. As my company is proprietory I'll be filing tax as an individual.

I have just started earning from adsense and the earnings are small. But I am trying and am quite sure it will increase a lot in the next 3-4 months. So what are the implications for me filing tax as an individual and earning a lot from adsense?

Flip

9:01 am on Mar 24, 2006 (gmt 0)

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No, You are not supposed to pay service tax on Adsense Earnings.
9:08 am on Mar 24, 2006 (gmt 0)

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TheFlipguy, If you are providing any web development service through your proprietorship then you need to pay service tax. I am just filing for my individual income tax and my company's [which is in my mother's name] income tax.
1:28 pm on Mar 24, 2006 (gmt 0)

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Hi all...

I am a CA myself and a webmaster having income from google adsense. I just registered here :) to reply to this msg in first place. In my opinion, service tax is certainly payable on adsense earning. You might be interested in following news item:

This is the news clip as appeared in "THE CHARTERED ACCOUNTANT WORLD - JANUARY 2006" issue:

-------------------------------------------------------

LEVY OF TAX ON SEARCH SITE
The authority for Advance Rulings (AAR) has clarified that Google Online India Pvt. Ltd., a wholly owned subsidiary of US based Google International LLC, will have to pay service tax for selling advertisement space on its search site to Indian entities. The advance ruling noted that the proposed activity of Google India to sell space on its site tantamount to providing a service to advertisers and clients.

-------------------------------------------------------

You can ask your CA giving refernce to above news item posted by me.

Regards...

1:40 pm on Mar 24, 2006 (gmt 0)

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opps... I guess the previous post was made by me in haste without reading the original post at [webmasterworld.com...] where this decision has already been reported :(

Anyway, let me clarify that once the service provided by google has been classified as taxable service, its nature will not change if we (publisher) provide the same service to google or to its client.

3:26 pm on Mar 24, 2006 (gmt 0)

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sakg

So have you personally registered under service tax?

Which category? Please guide.

6:36 pm on Mar 24, 2006 (gmt 0)

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sakg,

I may be wrong here, but this seems like tax payable by Google India for providing advertising services and not Adsense publishers.

I wish we had some specific information on this one. I sure do not want to contact the Income Tax Dept asking if I am liable to pay Service Tax! No point for guessing what their reply would be :-)

Flip

7:29 pm on Mar 24, 2006 (gmt 0)

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Point1: is that Google is selling advertising space to advertisers [and paying service charge for it]. Google is also NOT telling us for what price the ads were sold. All we get is a commision out of providing that space. We don't know what our cut of the pie is and we don't know which advertiser paid us the money. It's not a service we are providing - it's affiliate commission. <b>We are not displaying the ads. Google is [in an iframe which loads Google's page]. We are being paid part of the money paid by the advertiser.</b>

Point2: We are not an advertising agency. We are not creating nor providing our ad space directly for a service fee. We don't know what the service fee is [see point 1]. By the argument publishers do not fall into any of the service charge applicable category.

The ruling said : "Even mere providing or selling of space for advertisement is itself a service connected with display or exhibition of advertisements and hence will fall within the tax net as advertisement service."

Are we selling space? For what fee? Do we have authority to add a service charge?
The display or exhibition is located on Google's domain name. We are displaying iframes provided by Google.

6:51 am on Mar 25, 2006 (gmt 0)

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No, I have not personally registered my web business for service tax.

Actually, I have made certain adjustments.

The threshold limit of service tax is receipt of Rs. 400000/- during one financial year. So even if I have more than one company (or even a few ones) and each is having a total receipt of less than Rs. 400000/-, it can claim exemption from registration under service tax act altogether. I have spread my earning to few companies thereby avoiding service tax. :)

8:26 am on Mar 25, 2006 (gmt 0)

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is it 400000/- or 4000000/-?
9:30 am on Mar 25, 2006 (gmt 0)

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For Service tax the exemption limit is Rs. 400000/- (Rupees Four hundred thousands) a year.
10:15 am on Mar 25, 2006 (gmt 0)

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For Service tax the exemption limit is Rs. 400000/- (Rupees Four hundred thousands) a year.

Do you (A residential Indian Not a Company)need to pay service Tax if you export your services.I meam providing services to someone outside India who pays you in USD or GBP?
(Assuming value of these services exceed 400000 INR)

11:13 am on Mar 25, 2006 (gmt 0)

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Do you (A residential Indian Not a Company)need to pay service Tax if you export your services.I meam providing services to someone outside India who pays you in USD or GBP?
(Assuming value of these services exceed 400000 INR)

Yes it doesn't matter if you are an individual (consultant) or a company. You need to pay Service Tax.
11:16 am on Mar 25, 2006 (gmt 0)

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Yes it doesn't matter if you are an individual (consultant) or a company. You need to pay Service Tax.

Actually let me rephrase as this is not entirely correct.

It does not matter if you are an individual or company. If the service you are providing falls in the tax bracker (software development does) then you have to collect the service tax from your customer/client and pay it to the government.

11:42 am on Mar 25, 2006 (gmt 0)

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It does not matter if you are an individual or company. If the service you are providing falls in the tax bracker (software development does) then you have to collect the service tax from your customer/client and pay it to the government.

Is it true if you are providing services to a Non Indian individual or a Non Indian company(Like Google)

12:11 pm on Mar 25, 2006 (gmt 0)

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Is it true if you are providing services to a Non Indian individual or a Non Indian company(Like Google)

Yes it is true regardless of the location of your customer/client. However there is an ambiguity whether Adsense falls in the service tax bracket or not.

Adsense is a service provided by Google to the Publishers on a commission basis. The Publishers (us!) are not providing the advertising service. I guess this is the gist of this thread.

Flip

1:51 pm on Mar 25, 2006 (gmt 0)

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Export of taxable service is governed by "Export of Services Rules, 2005" (Not. No. 9/2005-ST dated 3-3-2005) and the discussion on the requirement is beyond the scope of this thread. I will try to post some links if I found something on this.

Just a summary: Yes, you can claim exemption from service tax if your service fall under export of service rules, 2005. But you will have to get yourself registered under Service Tax. Moreover, the payment for service must be received in convertible foreign exchange and there are other requiements also. (Not sure if you ppl are willing to go in that detail). However, if your service is treated as export service, not only you can export service without payment of service tax, you are entitled to a rebate of service tax paid by you on your input service.

Consult you consultant on this point and I am sure he will be able to guide you.

2:07 pm on Mar 25, 2006 (gmt 0)

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I found some good links at google by searching for the term "Export of Services Rules, 2005". You can go ahead and look for this links.
3:30 pm on Apr 1, 2006 (gmt 0)

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Hi

I am a newbie to adsense but have some experience with Service Tax in India. Went through hell just to get a registration number last year.Surrendered it this year.

My thoughts for what they are worth:

As long as Google bills from U.S.A , they donot have to pay service tax in India. When they shift billing to Google India , they will come under the tax net.

Publishers like us should show the earnings as ' Income from website ' and simply not mention adsense as the revenue source. Avoid too may details. If you insist in offering yourself to be sacrificed, the tax man will gleefully pick up an axe :)
As it is, there is no clarity on issue. We do not know , if this is revenue sharing or advertising revenue. One prime requirement under Service Tax rules , is that we have to raise an invoice for the tax + Advertising cost. Try Billing Google for Service tax :) The reply should be interesting.

If G bills 12.24 % Tax on adwords and we pay 12.24% on adsense , then effectively 25% of revenue is gone as tax. This is death Knell for MFA site from Indian publishers. I guess webmaster world memebers will celebrate!

 

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