GST and Income Tax Implications for YouTubers
YouTubers/Google Business Model
YouTube is a subservient unit of Google and completely synonymous with its parent body Google which controls it thoroughly. Accounts on both sites are linked up, search algorithms match each other. If given the option, Google will provide video results to YouTube before any other video hosting site. The two works seamlessly, the world’s most powerful search engine matched with the world’s most popular video hosting site.
YouTube gives YouTuber (any person who uploads it’s content at YouTube Platform) an option to monetize its content which if it opts for, then content gets commercialized in nature, meaning hereby that the content is available for advertisement spots. YouTube system streamlines displaying advertisements of third parties or sponsors in these slots by over lapping ads upon the original content for few seconds. This entire process triggered post after execution of an agreement with Google containing certain terms and conditions to which a YouTuber has to agree.
By having agreed to such agreement Google initiate placing ads over the content so monetized at YouTube platform, emphatically the YouTube in turn confers the right and yields the permission to its parent entity Google to access the monetized content and allows it to place ads overlapping the monetized content for predetermined slots.
YouTuber while agreeing to monetization of content authorizes and vests right to Google(YouTube) to place and overlap the advertisements of third parties or of sponsors on such content which remains live over YouTube Portal. This entire authority transmission as mentioned before executed by opening an Adsense account through an instrument agreeing the Monetization terms and conditions by Google enunciated in very same instrument of covenant.
Once all set by agreement then the revenue sharing model between YouTuber and Google comes into picture. Google charges the spots to the sponsors or advertizes and a certain percentage of revenue so generated by Google thereafter shared with the content owner or say YouTuber. This is how Google and YouTuber both earns the money.
Where YouTuber also advertizes with Google and Facebook under a campaign to increase it’s viewership of his YouTube Channel, and both auto deducts for such advert services from his Credit card.
Whether in such a case GST is livable on such charges and if yes then RCM apply?
Position in this regard has been cleared out by official pages of Google and Facebook both which is as under :-
Position by Google Source page – https://support.google.com/googleads/answer/2375370?hl=en
Taxes or Value Added Tax (VAT) might be applicable to your business, depending on its location. Read on to see what applies in your country. If you’d like to see information for another country, click the drop-down menu above.
Taxes in India
If you are located in India, starting July 1 2017, you will be charged a Goods and Services tax (GST) on all the purchases you make.
GST is the new tax law that replaces current indirect taxes such as service tax, Value Added Tax, excise tax, certain state and central cesses taxes in India. This is a dual taxation model where both the Indian states and Indian central government apply tax on services and goods.
GST consists of 3 types of taxes: central tax, state tax and integrated tax. Google’s location that provides the services and your purchase location determine which tax will be applied to your purchase. These are the rates:
Central GST (CGST) rate: 9%
State GST (SGST) rate : 9%
IIntegrated GST (IGST) rate: 18%
Advertisers with a bill-to address in Haryana (i.e. Intra-state service) will be charged CGST + SGST rates. All others are charged the IGST rate.
GST for SEZ advertisers is 0%.
If you are receiving services from Google India Private Limited (GIPL) then your tax ID will determine which tax is applied to your purchase. Goods and Services Tax Identification Number (GSTINs) are mandatory for business accounts, but optional for individual accounts.
Where to submit GSTIN
If you use the monthly invoicing payment setting, contact your account manager or email us to submit your GSTIN.
All other advertisers can enter their information by navigating to Billing & payments, then clicking on Settings from the menu on the left. In your “Payments Profile” you’ll see a section called “India Tax info” where you can enter any relevant ID numbers.
For Agency handled accounts please ensure the address and GST provided corresponds to the company and state paying for the invoices and claiming GST. If the ‘Bill to’ company name & address in your Invoice differs from the Company actually paying the invoices, please update the Bill to address .
For Business/Individual accounts please ensure the address and GSTIN provided are of the location where the services would be received. This means that the GST number should correspond to the state reflecting in the ‘Bill to’ address in your Invoices. If the GSTIN doesn’t match the state of the bill-to address, the GSTIN won’t be displayed on your invoices.
This is self explanatory from Google Official Page that the auto payment from client’s credit card will go to the account of Google India Pvt. Ltd which is a Indian company and as they mentioned at their website and affirmed there at that all such charges are inclusive of GST so it end up all speculations of paying GST on RCM by YouTuber availing advertisement services from Google India Pvt. Ltd.
Therefore Google India Pvt. Ltd. Itself under the duty to discharge the GST related compliances and pay off the GST billed by it to its customers who are availing advertisement services offered by it.
Position by Facebook Source –
About India’s Goods and Services Tax (GST)
The following information is for advertisers in India who pay for ads with a credit card, debit card, bank account or manual payment method. If you’re an advertiser in India using monthly invoicing to pay for your ads, see About India’s Goods and Services Tax (GST) for monthly invoicing instead.
From October 2018, Facebook ads in India will be sold by Facebook India, billed and paid for in Indian rupees and subject to a goods and services tax (GST) of 18% and Tax Deducted at Source (TDS) of 2%. This update affects all ad accounts that have their business country set to India.
To continue advertising on Facebook, go to your account settings and ensure that:
- a payment method has been added to your account;
- your business name, address and Goods and Services Tax Identification Number (GSTIN) have been updated.
Note: Entering a GSTIN isn’t mandatory. However, if you’re registered for GST and would like to take Input Tax Credit (subject to the fulfilment of other criteria under applicable law, where applicable), enter the GSTIN of your main state of operations or where your business is headquartered.
Please note that if you’re an advertiser that resides in a Special Economic Zone (SEZ), you may be certified with the government as GST-exempt. If this applies to you, contact client services to provide us with your valid SEZ certificate. GST and TDS are added whenever you’re charged for your ads. The amount charged includes TDS, but you’re still required to pay TDS to the government as per local law. Once you’ve provided Facebook with a TDS certificate from the government as evidence of payment, a TDS refund in the form of a Facebook ads coupon will be granted. To read more about TDS, visit the website of the Indian Tax Authority.
As an example, let’s say you were recently charged INR 100 because you reached your INR 100 billing threshold. The subtotal for the charge will be for INR 100 in ads costs, and then an 18% GST will be added on top of that, so you’ll pay INR 118 in total for that charge (INR 100 + INR 18 = INR 118). Please note that you’re responsible for paying the INR 2 TDS for the ads costs directly to the government. Facebook will refund your INR 2 TDS as a coupon once the TDS certificate you submit is validated. Because GST is added on top of charges, you won’t reach your billing threshold faster, but you may be charged more than your billing threshold amount.
This is also self explanatory from Facebook Official page that the auto payments from client’s credit card will go into the account of Facebook India Pvt. Ltd which is an Indian company and as they mentioned at their website and affirmed there at that all such charges are inclusive of GST so it end up all speculations of paying GST on RCM by YouTuber availing advertisement services from Google India Pvt. Ltd.
Therefore Facebook India Pvt. Ltd. Itself under the duty to discharge the GST related compliances and pay off the GST billed by it to its customers who are availing advertisement services offered by it. Also it has clarified the Tax Deduction at Source (TDS) implication at the very same part which has been discussed later in this article.
Matter Related to Income Tax
TDS Requirement and Compliance As it is clear from previous discussion that Google India Pvt. Ltd and Facebook India Pvt. Ltd both are Indian Companies operating from India and gets under the covenant or a contract with their potential customers to provide advertising services therefore TDS requirement also arises under section 194C of Income Tax Act 1961. Section 194C states that any person responsible for paying any sum to the resident contractor for carrying out any work (including the supply of labor), in pursuance of a contract between the contractor and the following: a. The Central Government or any State Government b. Any local authority c. Any corporation established by or under a Central, State or Provisional Act d. Any company e. Any co-operative society f. Any authority constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the needs for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages or for both g. Any society registered under the Society Registration Act, 1980 or under any such corresponding law to the Act in any Part of India h. Any trust i. Any university or deemed university j. Any firm The expression, ‘work’ in this section would include-
Advertising The person responsible for making payment to resident contractor/sub-contractor should deduct TDS, a. either at the time of crediting such sum to the account to the payee or b. at the time of payment thereof in cash or c. by an issue of a cheque or by any other mode, whichever is earlier. Where any sum is credited to any account, whether called ‘Suspense account’ or by any other name, in the books of account of the person liable to pay such amount, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. Thus, the tax has to be deducted even if the amount payable to resident contractor/subcontractor is transferred to suspense account by the payer in his books. Payment/Credit to any resident person other than Individual /HUF to be done at the rate of 2% where PAN card is available or 20 % where PAN card is not available.
No tax is required to be deducted in the following cases: a. Where the sum paid or credited in pursuance of any contract does not exceed Rs. 30,000, or b. where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year does not exceed Rs. 1,00,000 the person responsible for paying such sums will not deduct TDS under this section cc. Individual or HUF not to deduct tax if the payment or amount credited to the contractor is for personal use i. No individual or HUF shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for the personal purpose of such individual or any member of HUF ii. No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his PAN, to the person paying or crediting such amount. The position on the matter of TDS has also been made clear by Google India Pvt. Ltd & Facebook India Pvt Ltd through their respective official web pages. Where Facebook India Pvt Ltd touched base the TDS matter at the same very place where it explained the GST related matters, contemporary to this Google has taken up this at a different web page at its official web site which is as under:-
Position by Google Source hhttps://support.google.com/google-ads/answer/2375370?hl=en
About Tax Deducted at the Source (TDS)
TDS certificates are required every quarter. (More information can be found on the Income Tax Department of India website .) Certificates for quarters ending in June, September, December, and March need to be issued by July 30th, October 30th, January 30th, and May 15th, respectively. No TDS certificates for the previous financial year will be accepted if sent after April 30th of the current financial year. For example, all certificates for fiscal year 2013-14 should be sent no later than April 30, 2014. Sending Tax Deducted at the Source (TDS) certificate If your account uses monthly invoicing, send a digital copy of the TDS certificate (either electronically signed or a PDF scan of the signed certificate) directly to firstname.lastname@example.org If your account uses manual or automatic payments, use the following to send us the TDS certificate: Either send an electronically signed TDS certificate to us by email . Once the credit amount has been approved, it’ll be added to your account; or Send a signed hard copy of your TDS certificate, along with a cover letter that has your 10-digit customer ID, to the following address. Google India Pvt Ltd, 9th Floor, Building 8, Tower C, DLF Cyber City, DLF Phase 2, Gurgaon, Haryana, 122002 India Once you’ve sent the documents, contact us by email with the following details to get the credit: A digital copy of the TDS certificate (either electronically signed or a PDF scan of signed TDS certificate) Courier delivery receipt details Google’s Permanent Account Number (PAN) is AACCG0527D and the registered address on the TDS Certificate should be: Google India Pvt. Ltd. No.3, RMZ Infinity, Tower E, Old Madras Road, 4th & 5th Floor, Bangalore – 560 016
How much TDS
The current rate of TDS for advertising-related payments to Google India Private Limited is 2% excluding Service Tax and education cesses (per Circular No. 1/2014 issued by the Central Board of Direct Taxes, Ministry of Finance, Govt of India). Conclusion – Google India & Facebook India both has policy to give credit of TDS deducted by adding it up to account or by giving advertising coupons respectively. Advertiser may initiate deducting TDS on billing or may opt for an auto cut payment from credit cards at the rate of 2% as per section 194C as mentioned by both these vendors. TDS should be deducted after taking off the GST amount from the billing on in other words TDS shall be deducted on Taxable amount which is exclusive of GST. Online GST Training & Certification Course Schedule 28 hours of video classes E-Book on GST containing 786 pages Video classes and E-Books in English Language Enroll Now IIn addition to it post after TDS deduction Advertiser is required to file Quarterly Returns of TDS on or before prescribed dates as mentioned in section 203A of IT ACT 1961.
Applicability of FORM 15CA/15CB
A person making a remittance (a payment) to a Non Resident or a Foreign Company has to submit Form 15CA. This form is submitted online. In some cases, a certificate from a Chartered Accountant in Form 15CB is required before uploading Form 15CA online. In Form 15CB, a CA certifies details of the payment, TDS rate and TDS deduction as per section 195 of the Income Tax Act, if any DTAA (Double Tax Avoidance Agreement) is applicable, and other details of nature & purpose of the remittance.
IIn the instant case of YouTuber who uploads his content on YouTube do not make any payment to anybody in relation to any act pertaining to uploading process of content. So when no payment made to any Non Resident or a Foreign Company then question of Form 15CA/15CB does not arise, similarly even if an advertiser in India makes any payment to Google or Facebook, then such payment is made to subsidiary companies of Google or Facebook which are registered in India as Google India Private Limited and Facebook India Private Limited and by course of India taxation and corporate law they both are recognized as Indian Company so even in this case payment if made then it will be to domestic company and hence it is needless to say that here too question of Form 15CA/15CB does not arise.