Tax question for Indian publishers

Do Adsense earnings come under service tax bracket

[morpheus83]

I came across this post - [hellboundbloggers.com...] which mentions that even Digital Ads now come under the service tax bracket. The website does mention that we can collect it from the advertiser and I am presuming that it is for Indian advertisers, but the case with Adsense is different as we are paid by a foreign entity.

What is the bigger picture here? Do we come under this bracket or no?

[magician]

Services tax law has now put digital ads under the taxable services. This means all online advertising in India will now be taxed at around 14%. Google adwords also collects services tax from the advertisers and pay it to the government.

However, as an adsense publishers, we receive monies from foreign entities in USD which makes it an export of services and services exports are exempt from services tax. Theoretically also, it makes sense since adwords is already paying services tax on the total amount (generated from India) and if individual publishers are taxed again it will result in double taxation for the same service.

So, my understanding is that adsense publishers receiving money from foreign entities in foreign currency are for now safe from services tax. I think that's why google has started paying in USD now instead of rupees (when cheques were issued) as was the case earlier. You should keep all your records in place in case someone from services tax department ask for proofs. If you are a company, banks also issues currency conversion bill on all wire transfers which you should keep.

However, if you are doing direct ads and receiving money in India, you might need to pay the services tax if it exceeds the minimum threshold. Right now, this threshold is Rs. 10 Lac in a financial year (around $15400) - services tax kicks in only after that but is applicable on the full amount (meaning Rs. 0 tax on Rs. 9Lac but 14% tax on entire Rs.11 Lac).

Disclaimer: I am not a tax consultant or a CA. I concluded this by my own research and you should consult your tax consultant or CA before proceeding.

[morpheus83]

Thanks man, so you are using the payment option should be USD and not INR?

[magician]

Is there an option in adsense for choosing USD or INR? I am not aware of it.

[morpheus83]

Sadly we cant, its only INR.

[magician]

No, it's USD. Google pays the money in USD but banks convert the USD to INR.

[morpheus83]

Nope the transfer is made in INR,. if it is sent in USD, then the bank issues a FIRC.

[magician]

Does your adsense payment receipt shows USD or INR? Mine shows USD.

[magician]

Also, my bank (PNB) issues FIRC but I thought they do it only for companies and not for individuals. Some private sector banks, issue it automatically - they don't even inform the account holder about it.