GST on Online Advertising Business with Rate and SAC Codes

Every online business generates revenue by advertisements and selling through affiliate marketing. Under GST (Goods and Services tax) regime, the provisions are clearly mentioned for e-commerce operators. It is mandatory for e-commerce operators and online sellers to register under GST to make the business flawless.

• The ways to earn revenue from online advertising
• Allowing online advertisements (ads by Google and other ad-network) on your wall
• Put e-books on a sale directly on online portals or on e-commerce operators
• Earning by affiliate marketing
• Earning by sponsored advertisement

Online Advertising Defined Under CGST Act, 2017 And IGST Act, 2017 Includes

“Telecommunication service” means service of any description (including electronic mail, voice mail, data services, audio text services, videotext services, radio paging and cellular mobile telephone services) which is made available to users by means of any transmission or reception of signs, signals, writing images and sounds or intelligence of any nature, by wire, radio, visual or other electromagnetic means but not include broadcasting services.

Online information and database access or retrieval [OIDAR] services have been defined in Service Tax Rules, 1994, rule 2(1)(CCD) to mean services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology and includes electronic services such as-

• Advertising On The Internet
• Providing Cloud Services
• Provision of E-books, Software and Other Intangibles Via Telecommunication Networks Or Internet
• Providing Data Or Information, Retrievable Or Otherwise, To Any Person, In Electronic Form Through A Computer
• Network
• Online Supplies Of Digital Content
• Digital Data Storage

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GST Registration Norms For Online Publishers

Each e-commerce operator who sells online needs to register under GST. Being a blogger or a web publisher and selling goods and services through Amazon and Flipkart require a GST registration. Such bloggers (managing their own website) and web-publishers are necessitated to file GST returns and pay taxes. So every service provider who provides services using electronic networks comes under GST net. On the whole, the definition of e-commerce operator and e-commerce is vast to include all who transact online or manages a website.

Firstly, it looks like that every web-publisher or blogger needs to register under new indirect tax regime and it is true because online information and database access or retrieval services comes in the lieu of e-commerce and need to gain GST registration.

Input Tax Credit Benefits For Online Advertisers

Previously, advertising costs and manufacturing expenses are considered interchangeably and attracted sales tax and VAT. Due to an absence of input tax credit benefits, advertisers were losing huge. But, after GST implementation, spending on advertising is considered available for input tax credit on online advertising for paying 18% GST. It benefits the advertisers in compensating for their losses.

Advertising Cost And Savings

GST has reduced the cascading effects of a previous indirect tax system and that’s why has become a helping hand for the advertising industry to lessen the expenses in creating an ad. The decrease in advertising costs is positive as it will enhance advertising spends. A Kotak Mutual Fund repost describes that reduction in advertising cost will increase the advertising spendings and it will go high by 10% for the year 2017-2018.

The online advertising is performing well in India at a rate of 14% growth annually and it has touched $1 billion industry in 2016-2017. After GST implementation, the figure is expected to generate 24% more growth by 2020 and it will 100% increase to before GST time-period.

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GST Rate For Online Advertising

The advertising industry just come under the service sector and is required to pay 18% GST which is 3% higher than the previous 15% tax rate. Some consider it onerous but the fact is that the input credit availability is going to compensate for the increased tax rate and will neutralize the impact.

Overall, the increased cost created hurdles in the mindset of many traders but if we look into it clearly it is beneficial for all in terms of removing cascading effects and availing input tax credit benefits to the supplier.

Pre-GST Taxation of Online Advertising Businesses

As the service tax has been launched on all the services (excluding those that come beneath the negative list) which come into force from 1st July 2012, service tax was subjected to be applied on all the factors of GST Online advertising services excluding the sale of the space or time for advertisement in some of the cases. As per that the sale of the time slots in between the program telecasted on television, the sale of space on hoardings, and similar to that would not be obligated to tax. But from 1st Oct 2014, the negative list was revised to bind the non-taxability to the sale of space in print media, and all the other sale of space/time arrangements were carried beneath the net of service tax.

Online GST Advertisement via Registered Individuals Outside India

According to Section 5(3) of the IGST Act, 2017 reverse charge mechanism would be subjected to be applied to the said goods and services. It is indeed applicable for any supply of services via any individual who would be located in the non-taxable area to any individual situated in the taxable territory, different from the non-taxable online recipient. If Mr A obtains advertisement service via M/s. HIJ, an individual in a non-taxable territory, as a recipient of service Mr A would be needed to release the GST liability to the Government.

SAC Codes of Online GST Advertising services